The Ethics of Student-Faculty Business Deals

The Ethics of Student-Faculty Business Deals

The Akamai Corporation has meant big money for one Massachusetts Institute of Technology professor and one of his students. Back in 1995, Tom Leighton, a professor of applied mathematics at MIT, started playing around with ways to use complex algorithms to ease congestion on the Web. He enlisted several researchers, including one of his graduate students, Danny Lewin. At the time, they weren't thinking about starting a company. But Mr. Lewin, following the keen instincts of a cash-strapped graduate student, suggested they enter the project in the Sloan School's annual business-plan competition. They won the software category in the preliminary round and then entered the finals, where they finished among the top six.

Mr. Leighton and Mr. Lewin were still interested in the technology mainly as an academic exercise, but the possibility that their work could have real-world applications pulled them inevitably into business. They launched Akamai Technologies Inc. in the fall of 1998, and took it public the following October. Opening day saw the stock soar from $26 a share to more than $145, giving the company a day-one market cap of $13.13 billion.

This sounds like a great business venture, but there still is a small problem. Mr. Lewin was one of Mr. Leighton's students when they formed the Akamai Company. This brings about the moral question of the case. Should students and professors be allowed to start companies together? Although there is no clear answer, there is widespread agreement among administrators that schools need to address the question. As a result, many M.B.A. programs are in the process of reviewing and, in many cases, implementing policies and guidelines governing student-professor business collaborations. The burden of this moral question falls mostly on professors since student is not an establish profession and thereby has no formal code of ethics.

On one side of the issue are those who point to ethical considerations and insist that schools can't tolerate the possibility that students may perceive any conflict of interest on the part of a professor. On the other side are those who've invested substantial time and money in a business-school education specifically to gain access to professors. These people don't want to consider any restriction on their ability to conduct their business lives as they see fit. Caught in the middle are administrators, who must protect their schools' academic integrity while trying to accommodate students and faculty alike.

About a decade ago it wasn't as common for students to start businesses before graduating. But now, business schools increasingly operate like incubators, with entrepreneurial centers funds that invest in students' ideas. A professor can offer a young company both suggestions and credibility. Most professors also are looking to start companies and expand on their entrepreneurial instincts. The emergence of business school as a starting point for businesses has raised the expectations of students and has complicated what might otherwise be a straightforward ethical question.

In theory, of course, it's not the best idea for faculty to start businesses with students, because of the potential for conflicts of interest. If a professor and student are working on a business plan together, for instance, there's a chance that the professor may inflate the student's grade or allow him to skip class, all in the name of rounding up investors and making money. If one student gets an awful grade and a fellow student who has business ties to the professor lands a good one, class morale could suffer even if the student deserves it. Grades may not matter when it comes time to graduate, but the situation may irritate students who feel they're getting inferior access to the professor's time and intellect whether or not any real unfairness exists. The appearance of conflict might present more problems then the conflict itself.

Laura Hartman, a professor of business ethics at DePaul University, says the issue is the same as it would be were a faculty member and student having a romantic relationship. The acid test for a professor, she says, is this: "Are you engaged in something that will jeopardize or distort an appropriate relationship with your student?'' Ms. Hartman concedes that the university environment is rife with possibilities for conflicts of interest. She has often co-written papers with students, for example, and while she believes it has never posed a problem, she acknowledges that someone could argue that she helped to advance certain students' careers by working with them. "It begins a slippery slope,'' says Ms. Hartman.

Business-school administrators by and large agree, and many are racing to get ahead of the student-professor partnership issue before their programs inadvertently generate case studies on what can go wrong. In general, schools fall into two camps: those that have an explicit policy against any financial fraternization between professors and students, and those that don't have formal rules, but assume professors will steer clear of conflicts.

In the end it's worth remembering that business schools, by bringing together commerce-obsessed students and faculty, represent highly charged entrepreneurial territory. And just as chaperones at the prom aren't there to prevent teenagers from falling in love, business schools don't want to discourage the capitalistic sparks that can arise from a meeting of like minds. "A little oversight is probably not a bad idea," says Akamai's Mr. Leighton. "But to have draconian rules saying it can't be done limits good things from happening. That's not necessarily in the best interest of the school." Indeed, when the sparks fly just right, they can bring remarkable success -- and that's what business school is all about.

Egoism

Egoism makes the following claim in regards to ethics, "the individual self is the motivating moral force and the end of moral action." This can then be broken down into the positivist and normative ethics. Positivists would claim that egoism is a factual description of human affairs. This means that people are motivated by their own interests and desires. Normativist's take the position that people ought to be motivated by their interests and desires.

Positive Egoism

Positivist egoism is also known as psychological egoism. Psychological egoism offers an account of human nature in which it is believed people are wholly self-centered and self-motivated. In the strong form, the theory asserts that people