Reprint: R0810D
In the face of the recent institutional breakdown of trust in business, managers are losing legitimacy. To regain public trust, management needs to become a true profession in much the way medicine and law have, argue Khurana and Nohria of Harvard Business School.
True professions have codes, and the meaning and consequences of those codes are taught as part of the formal education required of their members. Through these codes, professional institutions forge an implicit social contract with society: Trust us to control and exercise jurisdiction over an important occupational category, and, in return, we will ensure that the members of our profession are worthy of your trust—that they will not only be competent to perform the tasks entrusted to them, but that they will also conduct themselves with high standards and great integrity.
The authors believe that enforcing educational standards and a code of ethics is unlikely to choke entrepreneurial creativity. Indeed, if the field of medicine is any indication, a code may even stimulate creativity. The main challenge in writing a code lies in reaching a broad consensus on the aims and social purpose of management. There are two deeply divided schools of thought. One school argues that management’s aim should simply be to maximize shareholder wealth; the other argues that management’s purpose is to balance the claims of all the firm’s stakeholders. Any code will have to steer a middle course in order to accommodate both the value-creating impetus of the shareholder value concept and the accountability inherent in the stakeholder approach.
