Why business schools can’t “return to normal” after the COVID-19 pandemic

Encouraged by a decline in COVID-19 cases, governments around the world are starting to restore normalcy after months of lockdown. This emphasis on “returning to normal” has sparked debate, with some commentators arguing that a simple reset would underestimate the growing economic anxiety and social unrest that’s been mounting since the 2008 financial crisis.

In December, a Washington Post piece called 2019 the year of the street protest. A “return to normal” could lead to further protests against neoliberalism and halt any hopes of near-term economic recovery. More recent protests against racial inequality, which began in the US and quickly prompted global outcries against the oppression of Black communities, further confirm that the old normal isn’t enough.

As a result, entire sectors need to reimagine a more equitable post-COVID world order. This includes business schools, which train the very talent required to steward a more inclusive economy.

Business schools are no strangers to adaptation. In 2008, many schools made efforts to revamp the curriculum, most notably by adding courses on ethics, social impact, and sustainability in response to growing speculation about the ideas financial executives involved in the crisis were exposed to at business schools. Still, while well intended, these changes proved insufficient.

Today, the world reconciles with even deeper levels of inequality. Real wage growth has declined since 2008, fueling much discontent with “economic elites” who have seemingly failed to correct fractured economic systems.

As the world braces for the worst economic downturn since the Great Depression, business schools must go beyond offering peripheral courses on ethics and sustainability and instead integrate discussions into the curriculum that cut across class lines and examine the limits of shareholder capitalism.

Highlighting issues from unsafe labour practices to the absence of paid sick leave, COVID-19 is exacerbating class inequalities and exposing the deterioration of worker power.

However, business education is almost exclusively couched under the ideals of fiscal conservativism, which favours lower taxes and reduced government expenditure. Studies have found that economics students lean favourably to this world view.

And while graduate classes discuss the inadequate representation of women and minorities on corporate boards, there is little to no mention of issues that cut across class lines. Specifically, there are virtually no discussions related to minimum wage, labour unions, or how declining corporate tax revenue has fed into the decade-long austerity measures that have devastated working class communities in Europe and the US, many of which are still weathering the effects of the 2008 financial crisis. This is in stark contrast to the rising number of global protests, from the “yellow vest” movement in France to demonstrations across Latin America sustained by a shared sense of worker injustice.

By unwittingly creating parameters around thought and discussions, business schools predictably churn out graduates who lack the critical thinking and creativity required to reimagine fractured economic systems—and who are unable to reconcile with Einstein’s famous words: “No problem can be solved from the same consciousness that created it.”

Business schools have long been criticized for promoting shareholder primacy. Harvard Business School Professor Rakesh Khurana argues that this problem dates back to the 1970s, when market fundamentalism took hold of business education. He posits that business schools bear responsibility for prioritizing shareholder primacy, arguing that “the new logic of shareholder primacy absolved management of any responsibility for anything other than financial results.”

A 2011 Brookings survey found that business school graduates “are more likely to see shareholder value as the most important goal of the corporation.” By perpetuating this viewpoint, business schools inadvertently validated excess greed and misconduct in the minds of budding young students who might not otherwise part ways with the ethical lapses of shareholder primacy.

In 2020, business is shifting away from shareholder primacy toward a more inclusive role in society—or stakeholder capitalism, the theme of the 50th Annual Meeting in Davos. The spread of COVID-19 has led to debates about what the new normal should look like, with some commentators arguing for an entirely new economic system. Sara Pantuliano, who heads the Overseas Development Institute, believes “we won’t get back to normal because normal was the problem,” while UN Secretary-General António Guterres argues “the recovery from the COVID-19 crisis must lead to a different economy.” In perhaps the boldest call to action, the editorial team of the Financial Times pressed for “radical reforms—such as basic income and wealth taxes.”

This shift in sentiment will inevitably shape the role of business in the years to come—and will require business schools to similarly revamp their teachings to reflect this new world order. This means going beyond merely offering courses on ethics, sustainability, and social impact to integrating stakeholder capitalism principles into the curriculum. And this would require business schools to more openly speak about power, a concept that former U.S. Labour Secretary Robert Reich said business schools typically shy away from.

By shying away from “power,” business schools shifted the study of economics away from the political economy—which examines how economic principles intersect with government and society—in favor of a more neoclassical form largely divorced from reality and lending itself to highly inequitable outcomes.

Take, for example, the economic crash of 2008, which few economists saw coming and led many to question the substance of neoclassical economics. In the decades leading up to the crisis, the banking and financial sector lobbied the government to water down safeguards that would otherwise limit the impact of risky banking bets. This eventually amounted to millions losing their pensions and homes, with little to no accountability. The lens under which economics is currently studied is simply unable to account for this and is even less adept at fixing it. Mainstream economics is woefully ignorant to the growing influence and power of the private sector in government and how it shapes economic outcomes.

Practically, business schools should emphasize success metrics that span beyond stock prices and profit maximization. Alone, these metrics deflect critical attention away from the adverse implications of tax evasion, government subsidies, and other efforts that might lend to greater stock prices but cripple the capacity of public institutions and exacerbate economic inequity.

Furthermore, these schools can play a critical role in curating success metrics that account for worker rights and protections, such as health insurance, paid sick leave, and childcare, and that identify the misuse of corporate power. There is a clear role for business schools to advance metrics that acknowledge the intimate relationship between business, government, and society.

Following the 2008 financial meltdown, governments around the world sought to introduce regulations to limit the prospect of another crisis. However, these safeguards have since been watered down, leaving the global economy at risk of another shock. Anger toward the political and economic establishment has neared a point of no return, as communities disproportionately impacted by COVID-19—and racial injustice—take to the streets to demand greater action against centuries-old oppressive structures. Now, the world is facing an even larger economic downturn, the likes of which has not been seen since the Great Depression.

As academics attempt to diagnose the cause of economic anxiety, they are sometimes undermined by business schools, which unwittingly perpetuate the economic anxieties they seek to understand. And as the argument to bulldoze the business school becomes mainstream, now more than ever schools need to reflect on their core tenets. Doing so would acknowledge the societal impacts of business decisions and present measures that could meaningfully save democracies facing existential risks posed by the rise in economic populism.