Bagley, C E; Clarkson, G; Power, R --- "Deep Links: Business School Students' Perceptions of the Role of Law and Ethics in Business" [2007] LegEdDig 7; (2007) 15(1) Legal Education Digest 18

Deep Links: Business School Students’ Perceptions of the Role of Law and Ethics in Business

C E Bagley, G Clarkson & R Power

[2007] LegEdDig 7; (2007) 15(1) Legal Education Digest 18

Har Bus Sch Working Paper No. 06-039, 2006, pp 1–29

Several legal scholars, including Prentice, have argued that what today’s business students need is not more ethics but more law.

To better understand how business school students view the relationship between law and business, we used the Zaltman Metaphor Elicitation Technique (ZMET) to elicit the unconscious thoughts and feelings of twelve students about the role of law in starting and running a business in the United States. Our study revealed three deep metaphors: system, moral balance, and force. In this subset of American culture we saw a far richer, more complex and less negative mental model of the role of law than previous survey or anecdotal data would suggest. We were frankly surprised to see the links our subjects drew between law, business, and ethics. Repeatedly, they expressed a need for what they described as ‘moral balance’ in business and in society as a whole; they viewed the law as essential to reaching and maintaining such a state. Management students currently bring this shared thinking or collective unconscious with them to the classroom and will someday bring it into already defined yet potentially malleable organisational cultures.

We believe that our research on how students at an elite business school view the role of the law in starting and operating a business in the United States offers new insights in the ongoing debate about how best to educate the business leaders of tomorrow. The results of our research suggest that the systems approach to law and management, which presents the role of law and business in a capitalist system within the broader context of societal needs and norms and highlights both the enabling and constraining aspects of law, may be more effective in making future managers more legally compliant and ethical than either a course in business law or a course in ethics taken alone.

ZMET helps consumers express their deep, latent and emerging thoughts and feelings through verbal and non-verbal metaphor elicitation and storytelling. Metaphors are central to cognition and allow humans to express the representation of one thing in terms of another.

Our study revealed the following deep metaphors of the role of law in business: system, moral balance, and force.

Deep metaphors are the major organising principles that reflect the ways in which individuals or cultures perceive, understand, and respond to their world.

Through intricately woven narratives and metaphors, our research subjects described both law and business as a system. System was expressed metaphorically via references to machines (wheels and gears, well-oiled machine), a constructed process or approach for solving a problem, a set of rules or procedures to accomplish a task, or following a ritual.

Law establishes moral balance in society: ‘The goal of law is to set up a framework in which tremendous value can be created but in a way such that human rights are preserved and the basic tenets and morals of society can be preserved, they’re protected.’ Law ‘sets the rules of the game and kind of defines how, from a public policy point of view, how we in society think business should run or should act or what limits should be set upon business.’

Thus, our subjects saw the need for both law and ethics — both a spine and a heart.

Our subjects perceived the law to be a force or entity. Force was expressed through references to power, a powerful presence, or a source of energy, as well as to the consequences of force (getting hit, slammed, impact). Law acts as ‘protector’ and ‘enforcer.’

Our research revealed extreme paradoxes in the existing mental model of these students. For example, each of the deep metaphors of system, balance, and force had negative and positive connotations. The law is both friend and foe. The law is a powerful tool that can be used proactively to help business but it can also be wielded as a weapon against business. Over and over, we heard stories that echoed this paradox.

The ZMET interviewer interprets the stories and metaphors that participants express about the focal topic and assigns a construct to these ideas, concepts or themes during the analysis portion of a ZMET study. Constructs capture the shared ideas, concepts or themes that research participants express during their ZMET interview.

A major outcome of ZMET is a consensus map. Consensus maps depict linkages among constructs: ‘Direct and indirect connections between constructs (or themes) represent a reasoning chain or thinking process showing how one idea leads to another ...’

We can imagine that each construct is a button that, if highlighted or activated, would in turn highlight or activate linked constructs.

Consensus maps normally contain between twenty and thirty constructs, and they typically represent more than 80 per cent of all constructs mentioned by any one participant.

We found that the constructs of law as a system and law protects were the most prominent and were most often interconnected with other constructs. The idea of protection was linked with other shared constructs, such as the idea of trust. Protection leads to entrepreneurship; it builds confidence; and it is necessary to the system that is the law. Participants also shared negative thinking about the idea of protection because laws that protect them could also be used against them as they protect others.

These constructs were in turn all linked to the idea of moral balance. For our map we defined ‘moral balance’ as ‘necessary in the system of society, when the law creates order and sets the terms for morality in the system of society.’ In the minds of our participants, moral balance is the force that not only keeps the systems of law and business running but also society as well. Without moral balance, the systems of law and business would experience system failure. This in turn would throw the system of society out of balance, thereby destroying trust and the ability of humans to interact with one another on a meaningful level.

Moral balance linked to the constructs of Used as a weapon against you: when the law is against you, there is a threat or danger to you and your business; to Used as a weapon against others: when the law is there for you, proactively on your side; to Necessary: always there, omnipresent, like a deity or a force; to Protects: when the law offers protection to people in business and to businesses; and to Good for Society: law is for the ‘higher good,’ it improves society through economic creation. These ideas in turn linked to other constructs, which taken together reveal the mental model of our management students.

If constructs and links exist on a consensus map that marketers want to be ‘top of mind’ for their customers, then marketers can work on new messaging that intensifies this thinking in the mental model. This suggests that a course of law could enhance students’ awareness of the need for socially responsible behaviour. Law as a system links directly to both protects and necessary, which in turn link directly to moral balance. As a result, a course focusing on law could help bring these other constructs to the forefront in the minds of students. Importantly, laws do more than regulate and constrain; they also enable and empower.

This last point is critical. While traditional law and economics’ scholars, such as Posner, have focused primarily on the constraining aspects of law, the new institutional economics movement has highlighted its enabling aspects. This approach is consistent with our subjects’ view of the world and seems a more promising way to inculcate in business students a respect for law than an approach that often characterises law as a hindrance to free markets, not as a necessary precondition.

By focusing on certain peripheral constructs revealed in our consensus map, educators might be able to develop curricula that can shift this thinking to the forefront of student thinking. Educators could create stronger links with the constructs of law protects and business if they did a better job of showing how important lawyers are to ensuring the rule of law and the value creation law enables. Perhaps managers would then be less likely to avoid the legal system and interaction with lawyers and instead proactively seek these out as means of enhancing value.

Instead of relegating law to what Gorden and Howell and Baron call the ‘nonmarket environment’ and of focusing on just its constraining aspects, the systems approach to business regulation proposed by Bagley may provide a more complete and balanced picture of the role of law and ethics in business.

Law affects business firms, but firms also affect the law and society as a whole. Law is not just an external force acting upon managers and their firms.

Law helps shape the competitive environment and affects each of the five forces that Porter identified as determining the attractiveness of an industry: buyer power, supplier power, the competitive threat posed by current rivals, the availability of substitutes, and the threat of new entrants.

Law also affects the internal context of the firm, that is, its resources and capabilities and the way the firm is organised. In particular, law affects (1) the allocation of firm resources among stakeholders (e.g., by allocating power between the directors and shareholders in anti-takeover and constituency statutes); (2) the environment in which resources are converted into products (e.g., by imposing strict product liability on each firm in the chain of distribution); (3) the marshalling of human resources (e.g., by permitting employment at-will while requiring the payment of damages for wrongful termination and banning employment discrimination); (4) the marshalling of physical capital (e.g., by offering limited liability to investors, giving entrepreneurs fresh starts under the bankruptcy laws, and promoting transparency in the capital markets under the federal and state securities laws); and (5) the uniqueness of resources (e.g., by providing copyright, patent, trade secret protection and enforcing certain noncompete agreements).

A business school curriculum that ignores the role law plays in making markets possible threatens to undermine students’ appreciation of the manner in which law undergirds the capitalist system. Our research suggests that the answer to the question of whether business students need more ethics or law is ‘both.’ Teaching materials that are expressly designed to highlight the positive associations or linkages between law, business, and societal welfare, that bring that top of mind, would appear to have a greater likelihood of altering students’ perceptions and thus their behaviour than simply exhorting students to be ethical or to comply with the law. The systems approach to management offers a way to link law, business, and ethics to create an integrated mental model.