Returning Pro

After waves of corporate scandals , is it time to return to the idea of managerial professionalism?

The recent wave of business scandals in America has raised fundamental issues about corporate regulation, governance, and culture. It is time to ask a question that we run away from: are managers professionals? The question may seem surprising. Today, we take it for granted that managers are professionals, like lawyers or doctors. But a century ago, when executives first made the claim, the public was skeptical. And in past decades, even as our faith that management is a profession has deepened, the actual substance of professionalism has been draining away, giving rise to a new business culture only weakly committed to the public interest.

Professions serve at least two functions. First, professions carry out the economic function of allowing only people who belong to a particular group to offer certain services, like legal or medical services, to consumers. Second, professions perform the social function of defining and enforcing a set of values and norms that counter the purely self-interested logic of markets.

However, "professional" management is unique in that it does not rely on either legal authority or public endorsement in order to claim its jurisdiction over managerial tasks in publicly held corporations, investment banks and other organisations. Getting a MBA degree, the de facto professional qualification for managerial jobs, does not require an oath of loyalty or a commitment to being up-to-date. Instead, managers have achieved their power and credibility through the interdependent relationship between university-based business schools (which derived legitimacy from the universities) and business itself.

That's why the first business schools in the US tried to establish management as a profession at par with traditional professions such as law and medicine. When their graduates managed companies, it was supposed to create more than just private wealth. In fact, the schools wanted to create a new class of leaders, who would play a public service role in industrial society.

By succeeding in getting business administration recognised as a subject of professional education, managers achieved the societal legitimacy they desired.

As demand for managers exploded after the second World War, however, the universities responded not just by establishing new schools and more programmes, but also by diluting the content of their offerings. Courses in business ethics and the relationship between business and society were quietly abandoned, and the emphasis shifted from "professionalism" and "education" to "vocationalism" and "training".

Then, in 1959, both the Ford Foundation and the Carnegie Corporation criticised the purely vocational nature of business school curricula, and distanced schools even further from public service by calling for more emphasis on purely academic social sciences and quantitative methods. These directives, along with the funding that the foundations provided, led to the recruitment of faculty from the social sciences, mathematics and engineering in the 1960s and 1970s.

As concepts such as agency theory and efficient-market theory found their way into the classroom in the 1980s, the system of managerial capitalism was collapsing. While investors took advantage of the market for corporate control to gain dominance over managers, MBA students were taught that they were merely agents, bound by arms-length, contractual relationships to clients and shareholders. Unfortunately, this view of managerial roles and responsibilities was incompatible with the concept of professionalism, and long before the wave of corporate scandals broke in 2001, management had ceased to be a profession.

For the past 20 years, we have witnessed the erosion of regulatory governance of our economic institutions and the weakening of traditional professions, with market forces exerting more and more control. The increasing encroachment of market forces on the autonomy of the traditional professions of law and medicine in recent years would seem to suggest the impracticality of a genuine management profession. If professionalism has been unable to hold its ground against the market even in areas where it is well established, how can it be established in a domain where the primacy of the market is the reigning orthodoxy to begin with?

I believe however we are living in a unique moment in history that has created an opening for fundamentally reconsidering the ideologically-driven choices made over the past generation, since their inadequacy, in many cases, is now apparent.

Perhaps, if led by the example of communities of conscientious and responsible professionals that still exist among the business community, we might find that turning managers into genuine professionals would be both desirable and feasible as a way of making our most important economic institutions better serve the interests of all our citizens.

• Prof Rakesh Khurana is an associate professor of business administration at Harvard University. His new book is called "From higher aims to hired hands", Princeton University Press, £19.95 (€30)