The value of virtue

When Gail Snowden talks about making profit off the "disadvantaged" in "poor neighborhoods," like Harlem in New York and Roxbury in Boston, not a single person in the classroom flinches.

Most of these 40 graduate students at Brandeis University are in business school precisely because they want to learn how to make money. And today, their pencils are flying.

But Ms. Snowden, president of the FleetBoston Financial Foundation in Boston, isn't discussing profit alone. A black woman raised in a family of social activists, Snowden spent years convincing corporate higher-ups that underserved communities would prove a vibrant resource for Fleet. Today she heads Fleet's Community Investment Group, which directs resources into low- and moderate- income communities.

Her work is just one proof, she says, that corporations can make money by being socially responsible.

This reinforces the two-fold message of Prof. Michael Appell's new course, "Corporations and Communications": Not only do businesses have a responsibility to behave ethically, but virtue itself can pay.

"We focus on the subject of return on responsibility," Mr. Appell says. "Overall, companies that take CSR [corporate social responsibility] seriously outperform those that do not."

The concept of CSR has been a part of some business school curriculums since the 1970s, but it has earned a more prominent place in the wake of recent business scandals. CSR is distinct, however, from business ethics, an older term that deals with misbehavior, such as fraud, within a company. CSR examines the impact a corporation has on the world around it - by, say, reviving an abandoned neighborhood or improving the working conditions of its factories in a developing country.

"I want my students to set aside whatever assumptions they have about NGOs [nongovernmental organizations] and business," Appell says - specifically, the notion that NGOs do good work while businesses make money, and that the two are mutually exclusive.

The students' own backgrounds help to challenge that dichotomy. They come from a dozen countries and two very different graduate programs - one focused on business and another on international development.

Many of the students were drawn to the class because it explores the potential overlap between these two disciplines.

"Most of the courses an MBA has to take include corporate finance, management, competition strategy," says Babar Lakhani, from Karachi, Pakistan, who studies at Brandeis's Graduate School of International Economics and Finance.

"This is something very different. It focuses on how, if everyone is good, the bottom line will be better, and stronger, because everyone is happier in a sense."

Deanna Becker, a student in the Heller School for Social Policy and Management and one of the few Americans in the class, is taking the course to learn more about the way businesses operate.

"I'm in the sustainable international development program, and we talk about all sorts of paths toward development," she says.

"But one of the things that often gets left out is that there's the force of business out there. I wanted to be in a class that actually addresses the impact that businesses have."

"Business ethics" has long been considered an oxymoron. In 1906, historian Ambrose Bierce defined the corporation as "an ingenious device for obtaining profit without individual responsibility."

In 1970, soon after the term "corporate social responsibility" was coined, economist Milton Friedman echoed Bierce's sentiments in The New York Times: "There is one and only one responsibility of business - to use its resources and engage in activities designed to increase its profits."

But in the mid-1970s, with the Watergate brouhaha still echoing and a string of business scandals revealing massive fraudulence and waste, the mere discussion of ethics was deemed insufficient. Whistle blowers turned to professors for help in the hopes that academia might influence a new generation of business leaders.

A handful of schools began to teach the "triple bottom line" - the idea that corporations should focus not just on economics, but on their social and environmental values as well. But these classes were few and far between.

Academic philosophers who taught business ethics, many of whom were also employed by corporations as morality consultants, began to argue that CSR needed to be included in the discussion. But it wasn't until the end of 2001, when Enron and WorldCom executives were caught with their fists in the cookie jar, that classes began to look at the value of incorporating CSR into ethics courses.

"Many schools have increased or strengthened their corporate social responsibility and ethics coverage in required courses," says Daniel LeClair of the Association to Advance Collegiate Schools of Business International (AACSB) in St. Louis.

AACSB recently surveyed 119 business schools in the US and found that almost 90 percent integrate CSR into the core curriculum. About 30 percent also offer a stand-alone course akin to Appell's.

But his class structure may be unique: "I wanted to bring in speakers from a variety of different settings who could tell the class what it's like on the ground in this world of social responsibility," he says.

Early in the semester, Charlie Rogers, manager of vendor compliance for Hasbro Inc., discussed improvements the company made in the living conditions of its factory workers in Asia. In turn, he said, the business had become more efficient - and more profitable.

Thomas Siekman, former general counsel and head of the ethics committee at Compaq, spoke about the importance of honest corporate behavior, and how it is key to instilling trust in its customers.

Steve Waddell, founder of Global Action Networks/Net, was invited to explain the Global Reporting Initiative, an attempt to develop international standards of ethics and conduct for businesses.

"There are some very important decisions out there that people need to make," says Marty Taylor, vice president of organizational services at the Institute for Global Ethics in Camden, Maine.

"Our work with kids indicates that the first step is creating awareness [about responsibility]," he says. "And the second step is figuring out how to do it."

Which is why Appell invites so many speakers to his class. "I want them to meet the actual people who are making a difference, so that we can talk about the role of leadership and understand what motivates them - and how they have been able to be a force for change within a variety of different bureaucracies," says Appell, himself a former president of one of the world's largest industry-sponsored charitable organizations, Two/Ten International Footwear Foundation.

One course on corporate responsibility is not enough, says W. Michael Hoffman, executive director at Bentley College's Center for Business Ethics, also in Waltham.

"When I grade my students on grammar, I'll get this comment ... that they'd already passed that course. We ought not to let that happen to ethics. They have to feel it's an integral part of being business leaders."

Appell agrees. "This is a beginning - and a good one - but only a beginning." Yet he remains optimistic that "there's a ripple effect that comes out of a course like this, where students get excited, talk to their peers, and bring these concepts into their careers. With the right information and motivation, they can become successful in the business and social sector and can make an enormous difference."