by Alice LaPlante
STANFORD GRADUATE SCHOOL OF BUSINESS—The fall of WorldCom, Enron, and Arthur Andersen, and the public humiliation of Kenneth Lay, Dennis Kozlowski, and Richard Grasso have caused the passage of the Sarbanes-Oxley Act, prompted the New York Stock Exchange to create new corporate governance standards for listed companies, and spurred major firms like the Walt Disney Company to adopt new, stringent, and wide-reaching guidelines for corporate ethics.
These events also have dramatically changed the way that MBAs view their job choices.
A survey of more than 800 MBAs from 11 leading North American and European schools found a substantial number were willing to forgo some financial benefits to work for an organization with a better reputation for corporate social responsibility and ethics. The research was by David B. Montgomery of Stanford and Catherine A. Ramus of UC Santa Barbara. “We were quite surprised by these results,” said Montgomery, the Sebastian S. Kresge Professor of Marketing Strategy, Emeritus, at the Stanford Graduate School of Business and dean of the School of Business at Singapore Management University.
Attempting to figure out what influences MBA job choices is not a new activity. Researchers in the 1970s and 1980s used the advanced market research technique of conjoint analysis to examine the relative importance of such things as financial compensation, the geographical location of the work, the volume and extent of business travel, and opportunities for advancement. There was evidence of substantial predictive validity from these studies indicating that conjoint analysis is an excellent tool for determining which attributes are most important in job choice decisions.
But missing from the earlier conjoint studies were attributes that the professors believed might affect MBA job choices in the 21st century. Montgomery and Ramus’ most recent study explored whether a reputation for high ethical standards or caring about employees, environmental sustainability, and community stakeholders makes an organization more attractive to MBA candidates. They also examined whether intellectual challenge of the job is an important selection attribute.
“There were no previous empirical studies that indicated how important these additional job choice-related factors might be,” said Montgomery.
The results were stunning: Intellectual challenge topped the list as the most important attribute for MBAs in their job choice decision. Interestingly enough, the financial package was only 80 percent as important as intellectual challenge.
Even more surprising was that reputation for ethics and caring about employees both rose to the top third of the list of 14 attributes, proving to be approximately 77 percent as important as the top criterion of intellectual challenge. Moreover, more than 97 percent of the MBAs in the sample said they were willing to forgo financial benefits to work for an organization with a better reputation for corporate social responsibility and ethics.
How much were they willing to give up? Again, the numbers were surprisingly high. On average, MBAs were willing to forgo 14 percent of their expected income.
Just as expectations of the public with regard to corporate social responsibility have changed dramatically in the past several years—as a direct result of the Enron and WorldCom debacles, among others—so, too, did Ramus and Montgomery find that MBAs’ expectations changed. A preliminary, pre-Enron study of the subject found that 94 percent of the MBAs were willing to forgo an average of only 12 percent of their income to work for ethically and socially responsible companies—a number that grew nearly 20 percent in the 2003 final report.
What does this portend for the future? There is a strong argument for firms to become more ethically and socially responsible in order to attract MBA candidates. There are important practical implications for both recruitment and retention related to maintaining a reputation for caring about employees and stakeholders; for a commitment to environmental sustainability; and for providing products and services that are considered ethically sound. MBAs want jobs where they can be intellectually challenged, but they prefer positions in organizations that demonstrate a set of socially responsible values in the way they do business.
Human resources and career experts already have been advising corporations that ethics is important to the best and brightest job hunters of the future. Indeed, a poll of career transition and career management professionals in 26 countries found that 82 percent cite corporate leadership ethics as of critical importance to job seekers, and that therefore ethics is fast becoming a major factor in the battle for top talent, according to a recent global survey by New York-based consulting firm DBM.
“The big surprise was that no one thought that corporate ethics was all that important” to jobseekers, said Montgomery. Conventional wisdom dictated that the major incentives to join a company were financial, financial, and financial. The implications? “Everyone thinks they know that MBAs are avaricious and greedy. And while no one is claiming that they are perfect, it turns out that MBAs are willing to forgo a significant percent of their income to be more moral across a number of dimensions.”
Corporate Social Responsibility Reputation Effects on MBA Job Choice, Montgomery, David and Catherine Ramus, GSB Research Paper # 1805, May, 2003
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