2010-06-21 09:20

Thomas Robertson

Tomorrow's business leaders need to question whether they are delivering results beyond shareholder value

In a recent visit to China as part of the Wharton School's ongoing exchange seminars with Tsinghua University and Peking University's Guanghua School of Management, a central question emerged as a topic of general concern: What is the role of business in delivering positive ethical and social outcomes? We are right to question business leaders and whether we can trust their intentions, judgment and capabilities to do the right thing. Are they delivering results beyond shareholder value that are beneficial to society as a whole?

Now more than ever business schools in the West and in Asia have an obligation to immerse themselves in these issues as they help prepare a future generation of business leaders to be a force for good in the world.

I believe that business, arguably the most powerful resource on the planet, must take a leading role in addressing the challenges the world faces. Environmental degradation, global climate change, poverty, disease, and human exploitation are all concerns that business should play a significant and positive role in addressing. All the better if this responsible reaction to the world's problems generates profit for business and a better quality of life for consumers.

When businesses work to solve social problems, they help produce a virtuous cycle of progress, connectivity, communication, collaboration and increasing velocity of commerce that will leverage inclusive capitalism to speed positive social change while creating vast new waves of newly-enfranchised and empowered consumers eager to embrace the security and rewards of middle class life. In today's global economy, nowhere is the potential for responsible businesses to create social good greater than in China.

Even before the onset of the "Great Recession," the rise of Asia and the phenomenal growth of the middle class in what are still generally considered developing countries were well under way. It is abundantly clear that the emerging worldwide economy is now vibrant with possibility for Asian businesses that know how to organize and conduct themselves in ways that align with the new realities.

Yet most business schools have traditionally focused on the developed world, largely ignoring three-quarters of the world's population and the businesses that address their needs. This mindset is shifting dramatically, not only out of a sense of social obligation, but also because this is where the world's future economic growth lies. Quite simply, innovation and entrepreneurship are the growth engines of the new world economy.

As the late business strategist and author C.K. Prahalad described in The Fortune at the Bottom of the Pyramid, businesses have begun to understand and address the rich aggregate market awaiting them among the world's less affluent consumers: "The real source of market promise is not the wealthy few in the developing world, or even the emerging middle-income consumers. It is the billions of aspiring poor who are joining the market economy for the first time. If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of business opportunity opens up."

Business schools have an obligation to create knowledge that will enhance social and economic welfare in the developing world and further accelerate the rise of a new global middle class. We are also in a unique position to advance business as a force for good.

In a recent study of Indian companies, four professors of management at the Wharton School asked the leaders of the 150 largest businesses in India to rank their management priorities. They found that nearly all the executive interviewed ranked their companies social missions first, while delivering shareholder value ranked a distant fourth. Findings such as these can influence good business practices around the world.

For what is missing in many developing market economies is management capability and the sense of entrepreneurship that allows people to create their own destinies by building new enterprises. People need to be able to develop the new skills that will enable them to do things in a different way, whether that means embracing a new business model, launching a new business, finding a new way to communicate or pioneering a new technology. Business leaders in China and other growing economies who seek to make a global impact will need to adapt to international business practices, regulations and ethical standards. This is where business schools in the West and in Asia can and should play a major role.

Responding to this challenge, Wharton is active in entrepreneurial and cooperative capacity-building initiatives around the world, providing current and future business leaders with the skills to think strategically, understand markets, and identify opportunities for growth while teaching the basics of finance, marketing, strategy, business ethics and organizational behavior.

The Wharton curriculum is also already highly international and collaborative. Our commitment to China, which has long been a key partner in our engagement with the global business community, continues to deepen and grow, reflecting China's inexorable rise in helping shape and define the global trends and influences critical to the education of leaders for the "new" global economy.

The faculty and students of today's Western and Asian business schools need to develop new approaches to building opportunities and enterprises in every region of the world. Business schools have a critical role to play in empowering China's future business leaders to embrace the potential for private enterprise to serve the public good. The next generation is ready, and I am confident that under their leadership, we will see the continued emergence of a new economic architecture - one focused on expanding prosperity for all, rather than on maximizing profit for a few.

The author is the dean of The Wharton School