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Currently, German universities offer about 300 MBA or Master of Business Administration degrees. Although invented in the USA, MBA and adjacent business degrees are the new vogue in Germany. Germans use the unpronounceable term Betriebswirtschaftslehre or BWL when talking about business studies and MBAs. According to two German BWL professors – Christian Kreiß and Heinz Siebenbrock – the infiltration of MBAs and the MBA-like thinking that comes with it, has dire consequences for German companies, corporations, workers, and society as a whole.
In their recent book “Smoke Screening, Profiteering and Lamenting”, Kreiß and Siebenbrock argue with the even Pope noted, this economy is killings us reflecting on the misery global capitalism causes in the so-called third world – a term that makes increasingly less sense – if it ever did. The authors do not argue that profits are wrong as such. On the contrary, they explicitly say, profits are good and important – profits über Alles. What they argue is that a one-dimensional focus on profits über Alles is highly damaging. This has to change, even when teaching German MBAs, as both authors do. Currently, Germany has about 240,000 MBA students or BeWeEller and a further 240,000 in business related apprenticeships.
Trained in German business schools, these MBA students carry a profit-maximising thinking into society leading to a slithering dehumanization. All of this is neither God-given nor did it come by nature. Instead, all those rules about the economy and society, we have given to ourselves. In other words, they can be changed. Even life at a neoliberal university where for every academic there are two managers and administrators can be changed.
Administered by managers, at universities, in business schools, and in companies, an assessment culture has taken hold with an overreliance on evaluation and measuring. Often, this includes what the authors call “revenge-assessment” [Rachebeurteilung]. Such top-down assessments cement an unhealthy distancing between managers and employees. Power can hardly be expressed any clearer. Understandably, all of this hasn’t led to improvements in employee satisfaction. One reason might be a managerial ideology that focuses too strongly on numbers. As a consequence, in more than two-thirds of all German companies, bad management is tolerated as long as the operative result is delivered, i.e. profits.
A prime example of such an over-reliance on numbers to the detriment of other goals has been shown by German railway boss Hartmut Mehdorn who created what is now called the Mehdorn Effect. It came when he cut infrastructure investment while taking the credit for saving money and then quickly moving on to manage Berlin’s airport. What Mehdorn left behind were crumbling tracks and the fact that one in five of Deutsche Bahn’s prestigious ICE trains barely function. For the authors, mismanagement like this starts with the education of MBAs in German business schools.
In these business schools, the standard MBA textbook is Günter Wöhe’s “Introduction to BWL” now in its 26th edition. The textbook sold more than 1.5 million times. It postulates that profit-maximisation is the all-defining goal of a company. Such arrogance and self-salutation can hardly be beaten. One of the key Godfathers of German BWL was the former Deutsche Bank boss and Nazi supporter Hermann Josef Abs (1904-1994). He coined the memorable quote,
Profit-making is as important as breathing. But it would be sad if we were on this planet just to breathe air. Similarly, it is bad if we lead companies for the sole purpose of profits.
There is also mention 1985 judgement of the Delaware Supreme Court on the importance of shareholder value. German business textbooks offer rafts of mathematical formulas in support of this assumption. As a consequence, the minds of German MBAs are filled with profit-maximisation until the end of their lives. Worse, these textbooks offer case studies based on complicated mathematical equations and students are eager to solve them. Focusing on these math problems assures that nobody thinks – never mind questions – the purpose of the exercise. In other words, German MBA textbooks train mindless corporate apparatchiks. There are German BWL professors that openly admit, we need the first four semesters to “brainwash” our students – the man really said brainwash.
Similarly, the former director of Germany’s highly regarded Max-Planck-Institute also noted the mono-cultural brainwashing that occurs in Germany’s business schools. It was the Nobel Prize winner Muhammad Yunnus who once said, Adam Smith’s theory of an invisible hand that solves all market problems doesn’t gel. Yet, another Nobel Prize winner – Joseph Stiglitz – wrote, since 2009, we know why Adam Smith’s invisible hand remains invisible: because it does not exist.
Undeterred, management textbooks carry on preaching the wonders of the invisible hand by insisting on corporate egoism. They never mention that egoism creates more harm than good. What was to be expected comes with Milton Friedman’s much quoted idea about social responsibility. In a public poll (2011), people on the street were asked about Friedman’s quote that social responsibility of business is to increase profits: 60% of Swedish people agreed with Friedman, 56% of US-Americans did as well, but only 35% of the German population agreed – which amplifies the unquestioned focus of German MBAs on profit-maximisation as the highest goal even more. Overall, there are five pathologies that create such a one-dimensional insistence of profit-maximisation:
1) Fraudulent claims and outright fraud directed against consumers;
2) Externalisation: negatives are off-loaded onto consumers, society, and the environment;
3) A lobbying culture that assured pro-business regulation;
4) Asymmetrical information favouring corporations over stakeholders;
5) Asymmetrical power relations set against NGOs, trade unions, society, etc.
Uncompromisingly, MBA schooling blunders on. A Canadian study examined a sudden increase in snow shovel pricing the day after the first snow fell. 82% of Canadians found the price increase unfair while 76% of MBA students thought the sudden cashing in was fair. A similar study found that the willingness of MBAs to help others, honesty, and loyalty declined dramatically between the first and the third year of study.
Set against this are the writings of one of the most recognised management theorists – Peter F. Drucker – who rejected the principle of outright profit maximisation. Undeterred, shareholder value became US capitalism’s new Evangelism. Not to forget Neutron Jack, the General Electrics boss between 1981 and 2001. After all, Jack Welch was named the “Manager of the Century” by Fortune Magazine. Welsh increased GE’s market value 29 times. Some of my own MBAs who had worked under Jack Welch have talked about his brutal methods.
This sort of thinking has taken hold in Germany as well. The Mercedes-Benz corporation, for example, has adopted the shareholder principle in its value-oriented corporate leadership [Führer] concept just as Germany’s privatized Deutsche Post AG. Germans still use the word “Führer” or corporate leader. Even more important is what the God-father of neoliberalism – Friedrich August von Hayek – noted. One of the most important aspects of my writings, he said, has been the influence it had on laymen, politicians, journalists, civil servants and the general public – this will have a long-lasting impact well into the future. In other words, economic theory has never been as relevant for neoliberalism as propaganda and public relations.
Out of Hayek, Friedman, and German MBA textbooks comes the profit maximization principle as a behaviour determining demand directed towards managers. This sort of thinking reaches deep into human resource management where people are converted into human resources or human material also seen as Menschenmaterial, human material or chattels, human capital, and human tools.
Despite an array of HRM ideologies, employees are still seen as disposable entities to be exploited. Indeed, in 2016 German employees clocked up no less than 782 millions of paid hours of overtime and 947 millions of unpaid overtime. The non-payment of overtime is theft. Stealing of a pen with a corporate logo can lead to instant dismissal. Indeed, there is one law for workers and one law that protects companies.
Particularly cynical HR bosses talk of a battle ship like the game in which you sink ships. They sink employees by overloading them with work until they quit. The blame goes to the employee – not the company. Regularly, such mistreatment is extended to women. Germany still shows a 21% wage gap. Meanwhile, 73% of Germany’s top-management committees have no women at all.
The negatives of shareholder values and profit maximization continue in the area of sub-contracting that has grown 24-fold between 1995 and 2016. A few years ago, a regular German worker made about €2,700 ($3,2000) per month while a sub-contracted worker made €1,856 ($2,200). This creates a two-class workforce where one is played off against the other.
Similar pathologies can be found in the area of bogus self-employment covering about 800,000 employees. Ryanair’s German setup even tried to employ pilots as self-employed workers. Similar abuses occur in the area of internships and apprenticeships.
Meanwhile occupational illnesses and work stress are on the rise. For much of this, Germans use “burn-out”. Overall, the pathologies of shareholder value obsessions reach deep into many management areas.
In the area of dishonest consumer goods, for example, a German coffee company has sought to maximize shareholder value by reducing a 500g bag to 400g while keeping the old price. The company attempted to justify it with improved quality. German consumers did not buy it. Meanwhile muesli bars get smaller while the amount of fish in ready meals declines. At the same time, the idea of buy-one-get-one-free entices people to buy even more products they do not need with money they do not have to impress people they do not even like.
In vacuum cleaners and other household goods steel parts are replaced with plastic parts that have two advantages: a) they are cheaper and b) the lifetime of the product declines. German product engineers can figure out the time your kitchen appliances break down almost to the day. Key to all of this is the very slow introduction of quality depletion so that consumers do not realize what is done.
While the illusion of the free market contains the idea of a perfect information asymmetry, German marketing MBAs have deliberately reduced the amount of information give to consumers. Important information is avoided, other information is misleading and unnecessary – even, or perhaps particularly, in advertisements. A typical German child will see between 20,000 and 40,000 TV-ads until grown up.
Plastering people with ads has assisted the fact that a typical German household owns roughly 10,000 items – most of which are hardly ever or never used. It’s like the car in your garage that is mostly stationary and rarely used – and even that declines with the Corona related increase in working from home.
In any case, one of Germany’s best known managers in the car industry was Ingnacio Lobez (originally from Spain). Known as the cost-killer, he moved quickly from Volkswagen to Opel (GM) while drastically reducing the cost of parts sourced from suppliers. After his departure, both companies experienced declining sales because of a marked decay in quality.
Volkswagen’s Diesel affair is yet another example where car managers focused on shareholder value – almost at any cost. Germany’s mighty car industry does not even shy away from getting TU Munich professor Helmut Greim to issue favourable reports. Perhaps the idée fixe is “we have the best experts money can buy”. Germany’s office of prosecution is currently investigating the case.
A not so favourable, i.e. a truly independent report on Germany’s car industry found that diesel emissions will result in thousands of premature deaths annually while 66,000 people will die unnecessarily from diesel pollution. At the same time, Germany’s car industry increased shareholder value with Volkswagen making €17bn, Mercedes-Benz €14bn and BMW €11bn in 2017. To smoke-screen the Ford-Pinto-approved death-vs.-profit issue, German MBAs have embraced the idée fixe of corporate social responsibility, according to welt-der-bwl.de.
Of particular interest is CSR in marketing. Searching for honest marketing is like trying to find your contact lenses in a swimming pool. To increase sales, marketing MBAs have applied an “everything goes” approach resulting in a rise in falsifications, trickeries, and lies. In the cosmetic industry there no longer exists a picture of a person that is not digitally manipulated. At the same time, Germany’s big pharma spends 20% of income on marketing and 1% to 3% on R&D. In other words, with no ads, German consumers would save 20% on the costs of medication.
These issues are hardly ever mentioned in Germany’s press. When the Munich based pharma company called Togal polluted the environment, Greenpeace asked Germany’s most reputable newspapers – the Süddeutsche Zeitung – to investigate. A corporate MBA at the paper told Greenpeace bluntly, Togal is a highly relevant advertising customer for us, we will not report on Togal. For Pharma-MBAs, patients have long stopped being patients – they are customers.
Meanwhile, medical doctors and nurses are performance managed by MBAs according to the profit they make while nurses and hospital staff are seen as a cost factor. In the mind of the MBA the term “cost factor” always implies “to be reduced” under the slogan: in dubio pro lucrum – when in doubt, for profits.
This sort of MBA-like thinking is, of course, extended to taxation where the golden rule – those with the gold rule! – is to avoid taxes as much as legally possible. One finds that any moral restraint about using trickery to reduce taxes is rapidly moving towards non-existence. This kind of thinking has infiltrated German society where tax avoidance has become a sport-like activity in which everyone tries to outdo their neighbour to the detriment of society. MBA/BWL thinking has also led to an overall monetarization and commercialization of German society. CSR is masking this process. It has become particularly prevalent in Greenwashing. Here are seven recent examples:
1) A biased and one-sided presentation of information;
2) Empty promises on the success of environmental standards;
3) Untrustworthy and often invented environmental certifications;
4) The use of unreliable NGOs with inferior environmental credentials;
5) Claiming to participate in environmental programmes that are worthless;
6) Deceptive narratives that claim sustainability where none exists; and
7) The fraudulent use of nice picture of the environment.
Such dishonesty in corporate affairs has a long history dating back to the tobacco industry; Germany’s pharma industry, the global financial crisis (2007f.), British Petroleum, Apple and Samsung (October 2018); renewed calls for a boycott against Nestle, etc. Overall, politicians aren’t acting in corporate criminality because companies favour three threats: the loss of jobs, the relocation of production facilities, and – worse – the withdrawal of campaign financing. The power asymmetry between the corporate sector and politicians is pretty obvious.
On the other side, there are companies that are not run by MBAs and not hooked on shareholder value creation as the only motive. The authors start with Fugger’s social housing that dates back to 1521 and is still in existence, Bochum’s GLS bank – a cooperative the Financial Times awarded the title: the most sustainable bank in Europe. There is also the Carl-Zeiss Foundation.
Overall, Germany has about 7,500 cooperatives with 20 million members. There is even an organic supermarket chain Alnatura. Ultimately, there is BUI – universal basic income. And there Silvio Gesell’s Natural Economic Order as a future BWL model. Beyond that, one might suggest the following laws as an immediate remedy for the pathologies created by MBAs and the relentless drive for shareholder value maximisation:
1) Legal support for companies that sustain societal welfare;
2) Ending certain provisions for corporate tax deduction;
3) A limit for CEO remunerations suggesting the Swiss model of a 1:12 ration;
4) Ending corporate lobbying;
5) Stopping corporate donations to political parties;
6) Terminating tax deductions for private equity investment;
7) An increase in inheritance tax;
8) A rise in corporate taxes; and
9) A reduction in the overall working time for Germany’s employees.
In conclusion, this is a rather sobering but expected assessment of Germany’s MBAs and into the teaching of MBAs creating pathologies inside companies as well as society as a whole.