Can elite business schools live up to their promise to reform capitalism?

As Columbia Business School opened its glistening $600 million (£493 million) campus just across from Harlem, its parent university announced a bold vision for business education. “The forces at work in the world are necessarily causing a rethinking of the foundations of the economic system we’ve had,” proclaimed Columbia’s president, Lee C. Bollinger, in The New York Times. “We are trying to come up with a framework that can be more about flourishing, not just profit,” added the school’s former dean Glenn Hubbard.

This intrepid ambition to upend capitalism as we know it is a refrain becoming de rigueur in elite business schools across the world. In Columbia’s case, the stated mission is “educating and developing leaders and builders of enterprises who create value for their stakeholders and society at large”.

This is not a new idea. The Business Roundtable – a club for top-shelf US CEOs – made a similar move several years ago. Back in the heady pre-pandemic days of 2019, the body released a statement on the “purpose of a corporation”, committing to “deliver value to all of [our stakeholders] for the future success of our companies, our communities and our country”.

Major business schools have dutifully adopted this corporate enthusiasm for stakeholders. Business schools are businesses, after all; they respond to the market. If the blue-chip employers that MBA graduates yearn to work for are purporting to rethink capitalism, then business schools must do likewise – especially as the risk that doing so will upset their rich donors is no longer significant.

From Harvard to Wharton, and from London Business School to INSEAD, environmental social and corporate governance (ESG) and diversity, equity and inclusion (DEI) are all the rage. Businesses schools claiming to be a “force for good” is a market trend.

These are welcome signs of progress, to be sure, and the people who can afford to take a few years out of work and spend hundreds of thousands of dollars on their education are bound to learn something useful. What a way to kick-start your journey to being among the highest paid executives and consultants in the world!

Critics seem to think this redirected moral compass really does have the revolutionary potential that its advocates proclaim – and are crying foul at the slightest sign of progress. Responding to Wharton’s announcement late last year about its newly minted majors in ESG and DEI, one alumnus claimed that the school was engaging in ideological “indoctrination” rather than education. And Vivek Ramaswamy, author of the book Woke, Inc., condemned Wharton for introducing “intellectually lightweight ‘majors’”, supposedly designed for less meritorious students.

But in my view the threat is the very opposite one: that business schools’ (and businesses’) ambitions to achieve foundational change, even if they are sincere, are unrealistic to the point of hubris. Business schools can play an important part, but it is far from revolutionary.

Decades of globalisation, financialisation, tax cuts at the top, corporate expansion and shareholder primacy have resulted in an economic system that has benefited the few over the many. Stakeholder capitalism does not herald a change to the underlying structure of that system. The cynics might even call it a survival strategy to ensure that capitalism doesn’t sow the seeds of its own destruction amid the rise of populism, ensuring that as little changes as possible.

Corporate diversity programmes may allow more women and people of colour to rise up the corporate ladder. That is excellent, but it won’t do much to reverse the fact that more than 70 per cent of the world’s population live in nations where inequality is worsening. Maybe a few people will swap places in an unfair system, but the system will be the same.

Rethinking and changing capitalism for a more equal future requires comprehensive and radical political and economic policy reform on national and global levels, and across divides of gender, race and class. No individual business or business school is in a position to drive such a vast agenda.

At best, a revitalised business education can help make tomorrow’s business leaders less destructive and exploitative than their predecessors, such that they might have some role in addressing this crisis of inequality. At worst, however, the promotion of stakeholder capitalism as some sort of panacea will distract from the much bigger political project of radically rethinking capitalism for distributive justice and shared prosperity.

Carl Rhodes is dean of the UTS Business School at the University of Technology Sydney. He is the author of Woke Capitalism: How Corporate Morality Is Sabotaging Democracy (Bristol University Press).