Michigan Ross Class Tackles Business-Government Rift, a Topic Magnified Amid Pandemic, Protest, and Election
It's no secret that business pokes its head into policymaking and government mingles in the market, even as the sides eye each other with suspicion.
What surprised University of Michigan professor Andy Hoffman was how little the relationships between them and their influences upon each other were being covered in business schools.
That led him to create Business in Democracy: Advocacy, Lobbying, and Public Interest, a graduate-level course for students of both the Ross School of Business and Ford School of Public Policy. And that, in turn, prompted him to receive the grand prize this year in the 12th annual Page Prize for Sustainability Issues in Business, about a decade after he first received the honor.
He offered it this past winter, as the COVID crisis loomed, and plans for it to return in winter 2022.
Hoffman, a professor of sustainable enterprise at the Ross School of Business and the School for Environment and Sustainability, discusses the importance of bringing such topics out in the open for future business and public policy leaders, and how much more crucial it becomes in the midst of a pandemic, economic struggles, social upheaval — and a highly divisive election year.
I know you determined there was a need for this topic to be explored in business school. How has that view been bolstered or altered with so many major societal challenges surfacing since you designed the class?
Hoffman: First, the COVID-19 crisis has exposed the extent to which we need government and business working together on a collective crisis. Business alone can't address the challenge of culture and behavior change and government alone cannot address the challenge of vaccine, mask and testing development. Together, in the proper balance, government and business can address this. But more deeply, the COVID crisis has exposed and inflamed some problems in the market that were fomenting before the crisis hit.
I keep thinking about the alarming statistics on income inequality that came out before the crisis: 40% of Americans were unable to pull together just $400 for an emergency. Well, we are in that emergency right now. What would you do if you needed to put food on the table for your family and didn't have the money? I think the answer for most people is — whatever I have to do. Now, think about what society looks like if 40% of Americans adopt that attitude. This is a dangerous situation, something that Nobel laureates Joseph Stiglitz and Bob Solow have been warning about for years. And just to drive home how malignant this problem is, add these statistics: 78% lived paycheck to paycheck, 44% earned about $18,000 per year and 42% had saved less than $10,000 for retirement.
The market needs adjustment and the government has to be the arbiter of that adjustment. The COVID-19 crisis makes that problem more acute.
Did you see some of the divisiveness play out among students coming from the differing sides?
Hoffman: I asked in one class what their peers thought of them taking this class. The Ford students said some of their peers were shocked they would take a class at Ross, much less walk into the building. The Ross students said they were hungry for this content but many of their peers could not understand why they would take a course on government. I think that many public policy students believe business is bad and that if only the government could set the regulations for the market, all would be well. And many business students think the government has no role in the market and policy is an unwarranted intrusion and restraint on the market. I think that mirrors what a lot of people in this country think. But we need to stop the conversation over more or less regulation in the market and talk about the right kind and the proper balance. At the same time, we need to teach both business and government students about the ways that the two communities can and must work together to address our society's problems.
So how do you set about solving it, or at least coming to some common ground — in both the classroom and country at large?
Hoffman: It is surprising to me how few business schools offer courses on government lobbying, much less collaborative and constructive lobbying. Indeed, common perceptions are that the government has no place in the market, regulation is an unwarranted intrusion in the market, and all lobbying is corrupt. These views are too simplistic and can be destructive. Government is the domain in which the rules of the market are set and enforced, and lobbying is basic to democratic politics as governments seek guidance on how to set the rules of the market and usher reforms as needed. Companies with a mindset focused on serving society can participate constructively in policy formation, seeking policies that help to make society and the economy strong and fair in the aggregate, not just for the select and affluent few.
What insights have you gleaned from the course or other teaching and research right now that might have surprised you or turned you on to a different way of thinking?
Hoffman: One benefit of teaching a course for the first time is learning material yourself. I really enjoyed stepping into this new domain and more deeply understanding, for example, all the precedent that led up to the Citizens United decision. A key to forming an opinion in such issues is to understand their foundations — issues like the personhood of the corporation and the question of whether the right to free speech should be extended to monetary political donations. Or, what the real writings of people like Adam Smith and James Madison had to say about business and government. Do you know the term "invisible hand" is mentioned only once in "The Wealth of Nations" and it is not a really prominent use? Yet it has taken on mythical proportions.
I have to say the biggest lesson I drew from this class is a strengthened belief that we need to change management education, moving away from a focus on shareholder value creation (which many, including the World Economic Forum, BlackRock, and Business Roundtable, have begun to question), moving away from notions of the corporate executive having few responsibilities to go along with the tremendous power that they wield, really returning to ideas of Peter Drucker in the 1950s that "the purpose of a company is to create a customer." Profits are one metric of how well the company performs this purpose, but ultimately, he argued, "the business enterprise … exists for the sake of the contribution which it makes to the welfare of society as a whole." Such a notion leads to a completely different approach to the role and education of the corporate leader. Sadly, COVID has delayed more course innovations. I wanted to offer a new course along these lines, but I will offer it when the time is right.
Andy Hoffman is the Holcim (U.S.) Professor of Sustainable Enterprise, Professor of Management and Organizations, and Professor of Environment and Sustainability at the University of Michigan Ross School of Business and the School for Environment and Sustainability.
Media contact: Jeff Karoub, email@example.com
Faculty News & Research Updates
Get a monthly digest of the latest business insights from Michigan Ross professors.