Early last year, I did a blog entry on a business school to professionalize management by getting managers to take the equivalent of an Hippocratic oath. The thinking is that this would prevent the kind of ethical lapses and conflicts of interest that resulted in the meltdown.
Not so, says Theo Vermaelen, INSEAD Professor of Finance. In this piece he says it's misplaced and useless because it would not stop the problem at all.
Vermaelen writes: "Signing the oath doesn't cost anything and therefore not a credible commitment. Even if Bernie Madoff had signed the HBS oath, he would not have acted any differently. Rather than focusing on pledges, businesses should make sure that managers comply with their fiduciary and ethical responsibility to maximise the wealth of the people who pay their salaries, i.e. the shareholders. The current debate should focus on how to improve corporate governance and how to design compensation contracts that are maximising shareholder value, rather than profits, earnings per share, return on equity or other non risk-adjusted short-term measures of performance."
Still, even he concedes there might be scope for an oath that requires the manager to look after shareholders. That's what's been missing so far.
no comment untill now