So many financial scandals raises the question of whether ethics classes work

Ethics professors at business schools aren't short of teachable moments these days.

This year alone, a Goldman Sachs' executive announced his resignation in The New York Times, outraged by managers' callous talk of "ripping off clients," whom they referred to as "muppets."

Banking giant HSBC Holdings has been under investigation for failing to prevent money laundering by potential terrorists and drug traffickers, while Standard Chartered Bank recently settled charges it laundered funds for Iran.

And employees at some of the largest banks in the world are accused of rigging LIBOR, a widely used interest-rate benchmark. Baltimore is the lead plaintiff in a lawsuit against those banks.

With news stories like that, who needs a textbook?

"It's absolutely getting worse, there is no question about that," says Shreevardhan Lele, a business administration professor at the University of Maryland's Robert H. Smith School of Business at College Park.

Many business schools started focusing more on ethics after the implosion of Enron about a decade ago. But given the news these days, you have to wonder how effective those efforts are, or whether ethics lessons can be made to stick once graduates enter the real world.

"It's too soon to judge whether schools are failing," says Paul Leiman, a lawyer and senior professional instructor at the Johns Hopkins University's Carey Business School. "We're catching up to the problem."

Ethics is a required course in Johns Hopkins' MBA program, as well as in the executive MBA program at Maryland.

Leiman says sometimes students come into class figuring they learned everything they need to know about right or wrong in childhood.

"They really do start out with this sense of 'Why am I here? I already am ethical,'" Leiman says.

But Leiman says what people learn as children is not sophisticated enough for the business world, where the most common problem involves making a decision when there is more than one right answer.

He aims to get students to examine their values and then apply them as they go through the MBA program and beyond.

Leiman often starts his course asking students if they would be willing to go to prison for three years — the sentence for insider trader Ivan Boesky — in exchange for $3 billion. More than half usually say the would, noting that's more than they could ever earn — and that a job is sort of like being in prison anyway.

To push them to think about what's important, Leiman says, he'll ask if they would spend every penny they have to save the life of the person they love most.

Everyone always says 'yes' to that, Leiman says. So then, Leiman points out, why would you agree to spend three years away from that loved one for money?

By the end of the semester, he says, few students say they would trade their freedom for money.

Ethics instructors give a variety of reasons why unethical behavior seems to be growing.

Lele blames a shift in the way people judge behavior, choosing to look at whether actions are legal rather than ethical.

"They confuse the legal with the ethical. The two are very, very different," he says. "A lot of business managers are unable to grasp the distinction."

Lindsay Thompson, an associate professor of business ethics at Hopkins, says research shows that students enter MBA programs with a broader set of values than just caring about profits. By the time they finish, she says, they've adopted a narrow credo that says a corporation's role is to increase shareholder value.

But the stakeholders of a corporation go far beyond shareholders, the ethicists say. Corporations have a responsibility to their employees, customers, suppliers and communities.

"There is no requirement that a corporation make as much money as possible," Leiman says.

Leiman says it can be harder to be ethical in a difficult economy, when speaking out might cost workers their jobs. But the serious ethical lapses we see today aren't by underlings, Leiman says, but by those at the top.

"We should feel they are leading the rest of the population in a direction that makes everyone feel that doing the right thing … is not only justifiable, but second nature," he says. "We don't have that. That's the failure of leadership."

Lele, though, says some might just use the bad economy as an excuse to ignore ethics. "You always do have a choice," he says.

Ethics instructors say they often use newspaper articles about Wall Street scandals in class. Thompson, for instance, used the resignation essay by Goldman Sachs' Greg Smith to discuss the firm's culture, along with why it took him so long to quit.

As bad as these headlines are, Leiman says, he sees a growing dissatisfaction with business as usual — in the corporate world and politics. He says he sees a stirring of an "ethical renaissance."

"What you do see is a willingness on the part of people to really seriously question what's going on," Leiman says.

Ethics instructors say there is no way to tell whether ethics lessons stick, although anecdotally they hear from students who say the classes changed their thinking.

In his nearly nine years of teaching at Hopkins, Leiman says, he's encountered only four students who appeared headed down the wrong path. One of those students told Leiman that the law was merely a suggestion, not a requirement.

"At the end of the day, I've done my job if I've kept my students off the front page of The Baltimore Sun and Wall Street Journal," Leiman says.