Business schools were once temples of market wisdom, teaching future executives how profits fuel prosperity and voluntary exchange lifts societies out of poverty. Yet our research suggests that these institutions today would rather pursue social change, preaching progressive doctrines with the zeal of converts.
In business schools across the globe, this transformation is well underway. Environmental, social, and governance (ESG) initiatives have proliferated. Diversity, equity, and inclusion programs have become regular fixtures. The “stakeholder model” of corporate governance, which encourages corporate boards to weigh the interests of non-shareholders, has displaced the traditional shareholder-primacy approach. Corporate Social Responsibility (CSR)—the practice of companies aligning with social and environmental causes, often to enhance their public image and manage risk rather than to drive genuine change or accountability—is presented not as an optional add-on but as an essential component of business strategy.
Finally, a reason to check your email.
Sign up for our free newsletter today.
Prominent American institutions have jumped on board. The University of California Berkeley’s Haas School of Business offers programs focused on sustainability. The Wharton School launched an ESG initiative complete with certifications and undergraduate concentrations. These programs herald a reorientation of business education.
The United Nations, through its Global Compact and Principles for Responsible Management Education (PRME), has taken a leading role in shifting business schools’ priorities. These schools have embraced the UN’s Sustainable Development Goals—17 objectives, ranging from “No poverty” to “Climate action”— as organizing principles for education and research.
Poverty, which the UN seeks to eliminate, is humanity’s default state. Alleviating it requires wealth creation, sustained by traditional business practices. Free enterprise, centered on voluntary exchange and profit maximization, has lifted billions from extreme deprivation. Yet leading business schools, mirroring the UN, now treat these principles as all but immoral.
The PRME initiative, supported by the Association to Advance Collegiate Schools of Business (AACSB) and other major accrediting bodies, calls for business schools to prepare students “to balance economic and sustainability goals.” This assumes an inherent tension between economic and environmental objectives, though markets create powerful incentives for companies to be efficient and reduce waste.
Economic and environmental goals aren’t inherently in conflict. Markets create incentives that often align the two. Our concern with ESG is that it imposes external priorities that may distort those market signals—not that sustainability and profitability can’t go hand in hand.
Business schools’ embrace of social activism has extended beyond curricula to research priorities. Academic journals and other publications have seen a dramatic increase in papers addressing ESG, DEI, and CSR. The acronym ESG has appeared in approximately 259,000 Google Scholar results since 2015—147,000 of them from 2021 onward, with 22,400 this year alone—reflecting a dramatic and accelerating surge in academic attention to the topic. While legitimate subjects of inquiry, the uniformity of perspective is troubling. The AACSB’s own magazine, for example, published an article celebrating institutions that champion “people over profit” without addressing the potential costs of stakeholder capitalism or the efficiency advantages of traditional profit maximization.
The geographic pattern of this transformation is instructive. Consider the Financial Times’s global top 100 MBA programs. While less than a quarter of American schools on the list are PRME signatories, nearly 90 percent of top-rated Canadian and European programs have signed on. This suggests that business schools may be more likely to embrace social activism in nations with greater centralized control over higher education.
Business education’s embrace of social activism is another example of an institution abandoning its core mission. Just as many journalism schools now emphasize advocacy over objectivity and law schools prioritize social justice over legal reasoning, business schools are redefining their purpose from understanding markets to changing society.
This is a category error. Business schools exist to research and teach the principles of successful commercial organization. When they become instruments of social transformation, they abandon their comparative advantage—their expertise in market processes—for areas where their competence is questionable and their legitimacy suspect.
The market economy succeeds by harnessing individual self-interest in service of broader social goals. Adam Smith’s “invisible hand” remains more reliable at delivering broad-based prosperity than corporate ESG initiatives. Business schools that forget this risk becoming irrelevant to the very enterprises they claim to serve.
Photo by Kyle Mazza/Anadolu via Getty Images
City Journal is a publication of the Manhattan Institute for Policy Research (MI), a leading free-market think tank. Are you interested in supporting the magazine? As a 501(c)(3) nonprofit, donations in support of MI and City Journal are fully tax-deductible as provided by law (EIN #13-2912529).
Source link
