The following is a guest post from Professor Atul K. Shah of the University of Suffolk.
Corporate fraud has become a norm in modern society, and it is high time that we focus the lens of #Paradisepapers to business education and professional training. We must ask what it is about the content of their theories and methods of training that has resulted in this. What must we do urgently to transform present and future generations? Given how vast and multi-billion dollar and global the business education industry is, it is high time we look closely at its DNA and theories and examine the extent to which these are offshore too. How do the theories encourage greed and fraud? Why is it that these smart professional accountants, lawyers and bankers simply don't care about the consequences of their actions? Do they even notice or understand how they are destroying the world?
Here are ten issues to address if change is to happen:
- Business and professional education have become profoundly privatised and technical, detaching themselves from public values, public conscience and personal responsibility and accountability
- Finance and financialisation dominates the culture of business education, which is very profit-driven, and the primary theory of wealth and profit maximisation. This ideology and logic is presented as unquestionable but is unsustainable and deserves to crash with #paradisepapers
- By making the subject scientific and technical, it becomes very impersonal. In addition, business schools are highly profitable factories of education, where the teaching approach and content is formulaic, and the student is on a production line. How on earth are they going to develop a conscience, or personal values in students in such an atmosphere? Their vulnerability and innocence is being actively exploited by the experts, and this must stop.
- Ethics, if taught at all, is a stand-along topic and not integrated with all the subjects taught in the business school. Its teaching tends to be philosophical, technical and legalistic, rather than personal, cultural, emotional and virtuous.
- Tax is treated as a burden and a cost of business, rather than a share of profit given to government for its vast contribution to business infrastructure in terms of health, roads, utilities, transport, education and skills, legal protection and social cohesion.
- Culture, as in faith, communities and social capital, is virtually ignored and therefore denied. The fact that students have culture and bring it into the classroom is suppressed and denied completely. Instead, an acultural universal approach to business is taught and globalised. Business education actively destroys culture to make its own living, and globalises this destruction.
- Business academics and intellectuals rarely engage with the problems of the real world and empathise with war, inequality, pollution and social upheaval. These are not profitable behaviours, nor do they boost CV's or egos. Just look at how many top business schools and their professors are commenting on #paradisepapers.
- Virtue is desperately needed to promote a peaceful and equal society. This requires virtuous conduct by educators and a profound respect for students and their hunger to learn and transform society. Business educators have failed in this regard.
- Corporate fraud and crime need to be at the centre of business education, but are avoided or ignored, when they have become so normalised. The curriculum must embrace this to help students truly understand how profit is maximised through corruption, crime, exploitation, regulatory arbitrage and tax evasion.
- Financialisation has led to a huge growth of financial power, which is undermining the very fabric of global economics, trade and sustainable society. This politics and power need to come centrally into the business curriculum, to show that wealth is often made through monopoly rather than through merit or effort.
I hope this article circulates widely among business students, and I welcome their thoughts and opinions.
Professor Atul K. Shah is author of Reinventing Accounting and Finance Education — For a Caring, Inclusive and Sustainable Planet
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Point 5:
“Tax is treated as a burden and a cost of business, rather than a share of profit given to government for its vast contribution to business infrastructure in terms of health, roads, utilities, transport, education and skills, legal protection and social cohesion.”
The Iron Lady famously called her preposterous Poll Tax a “community charge”.
Perhaps ALL taxation of business should be renamed under the heading of ” community charge”, to represent how much business owes to the surrounding community and societal infrastructure, enabled by Government activity?
An interesting post although I have to disagree with the initial point about corporate fraud becoming a norm. The paradise papers and even the lux leaks revealed nothing illegal from corporates (and fraud is be definition illegal). It did reveal some individuals misdeclaring income on their tax returns (loans back from overseas companies are caught by the disguised remuneration rules)
The morality point is interesting. I’ve always struggled for example with “sharia compliant” financing structures which effectively turn an interest return into something religiously acceptable. It’s as if they are treating their religious teachings as tax legislation to be manoeuvred around which I’ve never been able to rationalise
This depends how you define fraud
The Luxleaks revealed deception to secure financial gain
As I read the Fraud Act that’s fraud
2 Fraud by false representation
(1)A person is in breach of this section if he–
(a)dishonestly makes a false representation, and
(b)intends, by making the representation–
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
And yes, there was dishonest misrepresentation in some cases: HMRC were not told of all the Luxembourg agreements as I understand it
I suggest you are wrong
The Fraud Act was passed in 2006. It replaced eight deception offences in two previous Theft Acts, simplified the law, and was intended to provide a single crime of fraud. As I understand it, the previous Acts were confusing, too complex and risked the wrong charge or too many charges being brought against defendants. The whole system was out-of-date and ineffective.
There is a deep irony on the Fraud Act, 2006. It was passed by Parliament the year before the Financial Crash, 2007-8. It does not suggest a financially informed, acute, probing or wise Parliament; an interpretation confirmed by perusing the debates in Hansard (be my guest). My question is this; following the Crash, how many people have been charged with offences under the Fraud Act, 2006, particularly in the finance or banking sector, or arising from the Crash; and how many of those defendants have been found guilty under the Fraud Act?
I must acknowledge that I do not know the answer to my own question (which I admit is a very bad precedent to set when asking questions), but I suspect that where charges have been applied to activities associated with the Crash there may have been a requirement by prosecutors too often, to require to fall back on older statute or the common law. I stand to be corrected on this, and will be happy if someone wishes to present the evidence that my hypothesis is wrong. I would like to know the answer.
It is, perhaps worth observing that the absence of law does not mean there is no justification for criminal law in a specific field of activity, that actually works. While there were, no doubt, deficiencies in the US it seems that there the criminal law was a little more robust, and has been applied a little more assiduously and effectively in bringing prosecutions following the Financial Crash, than in the UK; again, my statement is anecdotal, from press reports in recent years.
In many cases regulators have applied fines but not sought to apply the criminal law. Clearly the criminal law does not apply in these cases, but the problem with relying solely on regulatory fines to act as effective correctives to future action, is that it also means that such fines carry a risk of becoming merely a cost of doing business (a form of taxation?).
The Financial Regulatory Authority has applied fines totalling £225m for the ten months to 23rd October 2017 (£22m in 2016, £905m in 2015). The predecessor regulator, the abject, failed FSA, has fines tables going back to 2002. I have, of course completely excluded US fines that were also applied to international banking and financial operations in London. It is also worth pointing out that the fines levied are small relative to the scale of the markets to which they apply.
We need to teach Ethics to school kids and inform them what is right and wrong. The problem is greed blights all walks of life, not just businesses.
Depends who is teaching what is right and wrong, doesn’t it?
If enough people share the same morals, laws are passed.
Otherwise it is extreme arrogance and dangerous to say you “know” what is wrong and right and to teach this to others.
This is the territory of dictatorship.
In that case it’s time for the whole economics curriculum of most universities to be deleted
“This is the territory of dictatorship”
Really? how pompously righteous, uniformed and dull.
There is a huge and well established academic discourse on ethics (metaethics, normative ethics, applied ethics) and then there’s the equally well established discourse in the legal profession etc etc.
All of that stuff takes your dead obvious concerns about objectivity into account. It helps if you take the time to learn something about a topic before you come out with the grand soapbox opinions.
Now thrive the accountants as Shakespeare might have said. But, of course, he was into property.
Perhaps you have in mind part of John of Gaunt’s famous “This sceptered isle” speech in Shakespeare’s “Richard ll”:
“This land of such dear souls, this dear dear land,
Dear for her reputation through the world,
Is now leased out, I die pronouncing it,
Like to a tenement or pelting farm:
England, bound in with the triumphant sea
Whose rocky shore beats back the envious siege
Of watery Neptune, is now bound in with shame,
With inky blots and rotten parchment bonds:
That England, that was wont to conquer others,
Hath made a shameful conquest of itself.”
I have to admit, though, that Shakespeare’s words here seem to chime in with the point about aggressive exceptionalist Englishness set out in Arthur Kaletzky’s post of yesterday elsewhere on this site, which I repost:
http://www.theneweuropean.co.uk/top-stories/the-problem-with-the-english-england-doesn-t-want-to-be-just-another-member-of-a-team-1-4851882
As Arthur Kaletzky said – well worth the read.
Agreed
Perhaps Bernard de Mandeville’s ‘Fable of the Bees’ (1705), which Mandeville described as ‘doggerel’ (but the ideas influenced Adam Smith), is more appropriate to the current discussion. Such as this excerpt:
“And some were damn’d to scythes and spades,
And all those hard laborious trades;
Where willing wretches daily sweat,
And wear out strength and limbs to eat:
While others follow’d mysteries,
To which few folks binds ‘prentices;
That want no stock, but that of brass,
And may set up without a cross;
As sharpers, parasites, pimps, players,
Pickpockets, coiners, quacks, southsayers,
And all those, that in enmity,
With downright working, cunningly
Convert to their own use the labour
Of their good-natur’d heedless neighbour.
These were call’d Knaves, but bar the name,
The grave industrious were the same:
All trades and places knew some cheat,
No calling was without deceit.
The lawyers, of whose art the basis
Was raising feuds and splitting cases,
Oppos’d all registers, that cheats
Might make more work with dipt estates;
As were’t unlawful, that one’s own,
Without a law-suit, should be known.
They kept off hearings wilfully,
To finger the refreshing fee;
And to defend a wicked cause,
Examin’d and survey’d the laws,
As burglars shops and houses do,
To find out where they’d best break through.”
I find I tend to agree with Atul Shah’s work and this is no exception. Thinking back to my business studies days, we did discuss in some detail the merits and weaknesses of privatisation versus the nationalised industries. In those days the water, gas and electricity utilities worked well but there were problems with telephones which privatisation and competition have improved.
I recall, as a business consultant, visiting a manufacturer associated with the steel industry in Sheffield and after discussing my plans with one of the directors, we walked back to my car in their car-park and he looked in contempt at my Ford Capri and pointing to his brand new Rolls Royce he said “it is dog eat dog in this world and you take what you can when you can, so we won’t be using your ideas.”
I still have the view that we should have both nationalised and privatised operations competing against each other, particularly with banking and transport, so that the consumer has the choice and the product costs would soon indicate where the real benefits lie.
I also hope this is shared widely among students and would-be students. It would be a tragedy if students were choosing courses without being aware of their lecturers’ views.
I’ve long thought that if the left set a good example by openly paying more tax than they need to, at the rates they would like to see imposed, it would make it much harder for neoliberals to argue against them.
What do you say Richard?
I say you have not the slightest idea of what taxation is meant to achieve
I suggest you stop being facile and do some reading
I guess that is a “no” then Richard and you won’t pay a penny more than is legally demanded. Just like Amazon Google and the rest.
Only they are being immoral and you are not. Because reasons.
But I pay within the spirit of the law
And they do not
And you know you’re being fatuous
And I know I am not
Surely Phil, what you are really trying to say is that as long as one is not a beggar in the street, one should vote for the most right wing party available. Until you are penniless you have no right to question those in authority. The usual nonsense you hear from dishonest right wingers (is there another kind?)
Here’s a suggestion, Phil – take a look at what companies like Amazon actually do. Clue: They haven’t just opened an ISA account.
Richard, Why do you publish rubbish like this from Phil? Is it just to demonstrate their idiocy? I generally agree with you, but I am sure you have more interesting detractors than this.
James
Contrary to rumours most detractors get on here for a while
Phil then became quite inappropriately personal – so I deleted him
But sometime I publish the idiots just to show that they are still out there
Apologies for wasting your time!
Best
Richard
I find Prof. Shah’s post to be very interesting and wholly agreeable but I do think that his point about financialisation could be clarified a little further.
The problem with business education generally is not merely that it is too technical, scientific and lacking in culture and public values, but that the science itself fails by its own measure. The point about financialisation bears this out. Those that are familiar with orthodox economics (which is usually part of business education) might also be familiar with so-called “welfare economics” which has nothing to do with social welfare. It is about macroeconomic efficiency, maximising output, ‘optimality’ etc.
Those that are familiar with the trend toward financialisation will be aware that the financial sector (financial corporations and markets) have grown at a much faster rate than industrial sectors. The role of finance is to allocate capital. That is all. In and of itself the financial sector produces nothing. So what we are witnessing is a process by which those that supposedly arrange finance for producers are making more money than the producers themselves. That distortion is an inefficiency.
If finance produces nothing its growing wealth must nonetheless be coming from somewhere. The expansion of the financial sector has become the prime example of rent-seeking (the capture of existing wealth) which thrives at the expense of production (the creation of new wealth). Orthodox economics recognises that a relative increase in rent-seeking is welfare inefficient. What’s more it is not merely a trend toward monopoly that drives this but the expansion of the financial sector itself.
With the point of all this being that if “Finance and financialisation dominates the culture of business education” as Prof. Shah suggests then business education has not failed to include culture and social values, it has not merely failed by our estimate, it has failed on its own terms and done so massively.
I know that Prof. Shah has touched on this point but I would suggest it should be central. Orthodox business academics may well be happy to think that some find them too narrow. They would not be comfortable in knowing that they are hopelessly at odds with their own aims and values.
Typo Correction: “business education has not only failed to include culture and social values,”