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6 Scandals and controversies that rocked the MBA world

MBA Scandals and ControversiesWhen a ticket to big bucks is at stake, expect things to get a little twisted. Yep, even the top business schools are not immune to the seamier side of human nature, which is always looking to cheat, claw and con its way to the top.

The sad reality is that business schools and students are equally culpable at faking, defrauding and flaunting their sad lack of integrity in the race to get ahead at any cost, begging the question: is an MBA the hallowed degree it once was?

All is not what it seems inside those glinting steel-and-glass buildings or polished oak-panelled interiors, depending on which business school’s shenanigans are in question. Here’s a peek into some recent scandals and cons that exposed the darker side of some business schools, ranking no bar.


1. Sex, Lies & Loathing

When the world’s No 1 business school features in Vanity Fair, it can mean only one thing – a ‘spiralling sex scandal’, as the magazine calls it. The scandal resulted in the resignation of Garth Saloner, dean of Stanford University’s Graduate School of Business (GSB), in September 2015.

But it isn’t the romantic relationship per se that had GSB’s hallowed reputation on the ropes; Saloner’s resignation came after a former GSB professor, Jim Phillis, filed a lawsuit against him and the business school, alleging discrimination and wrongful termination in 2014.

Phyllis, now teaching at Apple University, alleges that he was fired as the fallout of an affair between his estranged wife, Deborah Gruenfeld, a high-profile professor at GSB, and Saloner, an expert on game theory and mathematical modelling, and described by many as a ‘visionary dean’.

The affair came to light when Phyllis discovered incriminating electronic messages between Saloner and Gruenfeld, including a text message from the dean to his lover that said, ‘Knife. Penis. Town square’ as the couple joked about how they would ‘take care’ of Phyllis.

The blowback from this shocker was massive; the sex scandal was apparently only the tip of the proverbial iceberg. Turns out that to cover his back, Saloner had confided his affair to the business school management but it turned a blind eye, implicitly condoning it.

As if apathy and unprofessionalism of this order from the management of the world’s top business school is not enough, there’s more. The sex scandal brought to light the alleged ‘atmosphere of fear’ that Saloner had fostered among the faculty and staff.

Sharon Hoffman, a former associate dean who ran the MBA program at GSB from 2001 till she quit in 2012, is quoted as saying: “When Garth came in, it went from morning in America to Soviet Russia.


2. Of Boys & Men

Long touted as ‘old boys clubs’, business schools are notoriously unfriendly places for women, and the Garth Saloner sex scandal at GSB brought this unsavoury reality to the fore, yet again. After Jim Phyllis filed his lawsuit against Saloner, it turned out that 46 current and former employees – 10 per cent of the staff at GSB – had signed a petition in 2014, claiming there was “a hostile work environment” that differentiated “on the basis of gender and age.”

The allegation also echoed loud and clear in the corridors of Hoover Institution, a think tank and research institution at Stanford University. In 2013, women at Hoover alleged rank gender discrimination, claiming a bias towards hiring men and marginalising women.

According to the findings of an inquiry conducted by the Stanford management, women in one department said the “work environment was threatening at times”, while a majority of women said it was “not always a ‘respectful’ workplace”.

Female faculty at GSB are not alone in their predicament. In 2014, an internal academic review at UCLA’s Anderson School of Management, leaked to The Wall Street Journal, found that the school “is inconsistent in how it hires and promotes women as compared with men; has created “gender ghettos” in certain academic areas; and shows a “lack of confidence” in female faculty.”

According to the review, female faculty members had “high rates of job satisfaction when beginning careers at the school but faced a ‘lack of respect’ regarding their work and ‘unevenly applied’ standards on decisions about pay and promotions.”

But, perhaps, the most dramatic admission of gender bias to date has come from the dean of Harvard Business School, Nitin Nohria, who publicly apologised for the business school’s past behavior toward women in a ballroom at the Ritz Carlton Hotel in San Francisco in January 2014.

Addressing 600 alumni and guests, Nohria acknowledged, almost with a flourish, that HBS had sometimes offensively treated its own female students and professors, and also conceded that there were times when women at Harvard felt “disrespected, left out and unloved by the school”. He said, “I’m sorry on behalf of the business school. The school owed you better, and I promise it will be better.

Nohria’s apology was no impulsive gesture aimed at earning goodwill, nor had it arisen from the depths of a bubbly champagne glass. It was a well-calibrated effort at damage control, coming close on the heels of a front-page article in The New York Times that described the business school’s efforts to deal with gender inequality as well as those at other top management institutes.

What was Nohria’s olive branch? Better representation of women in case studies taught at the business school. You could almost hear the alumni present at the gala evening choke on the caviar!


3. Rank Dishonesty

Nothing is more stressful for a business school than waiting for the annual rankings of MBA programs in the US published by the U.S. News & World Report. The top bschools and their students have their future riding on that and a couple of other elite lists.

So it created quite a stir when it was discovered that Tulane University’s Freeman School of Business had inflated the GMAT scores of its applicants and the number of applications it had received, to up its rankings. It worked, at least for five years, catapulting the business school into the coveted Top 50.

The fraud surfaced in 2013 after the departure of its admissions director a year earlier, when it was discovered that the business school had inflated average GMAT scores of enrolled students by 35 points, between 2007 and 2011. It had also boosted the number of applications received annually by an average 116 applications during that time. After the tainted data came to light, Freeman’s rankings plummeted from 43 to 67.

But the scam didn’t deter other desperate management schools from doctoring data to climb the rankings. The University of Missourie-Kansas City’s Bloch School of Management was at the centre of a storm when it was discovered that the school was engaged in a series of misstatements, exaggerations and non-disclosures to raise its rankings, enrollment numbers and potentially open the doors to more funding.

The final straw came when the b-school was ranked No 1 – ahead of Harvard, Stanford and MIT – in innovation management research (a discipline that studies how entrepreneurial ideas are turned into successful corporations) by an academic study published in the Journal of Product Innovation Management. No 1? No kidding!

The dirt really hit the fan when it was discovered that the authors of the study were two visiting Chinese scholars who had been invited to the business school for a year by the then dean and a professor, all of whom had known each other for a few years before that. Although the business school denied any wrongdoing, the Chinese scholars had clearly overstepped their brief.


4. Cheaters Never Prosper?

That’s a phrase graduate students, especially graduate business students, are turning on its head. In a huge blow to personal integrity – and that of the business schools that condone it – cheating is widespread. Disturbingly, it is becoming an ‘accepted’ practice too. Retired professor Donald Mccabe from Rutgers Business School is all too painfully aware of this.

McCabe had studied cheating practices in educational institutions for many years and threw up some unsettling findings.

In a landmark study spanning 5,000 students and 32 institutions in the United States and Canada, McCabe found that 56 per cent of graduate business students (most of them from MBA programs) had engaged in cheating. This was 9 per cent higher than graduate students from other disciplines.

Digging deep into the issue, he found many reasons that, in fact, allowed this practice to flourish. One, many business schools don’t have the resources to remain vigilant and monitor submitted work or exam behavior. Also, when students are caught in the act, there is always the prospect of being challenged by expensive and protracted litigation, and business schools don’t want the hassle.

Why aren’t students calling out fellow students who cheat? The answer lies in a culture of collusion as well as a culture of apathy. Why would a student bell the cat when the institute is not willing to?

Then, there’s the example set by the corporate world. Most MBA students work for many years before signing up for a business degree. They have therefore already been exposed to a corporate credo that tells them ‘it’s okay to get the job done at any cost’ because all that matters is the bottom line. In a world that often favours the baser side of human nature driven by avarice, ‘integrity’ is only a useless quirk cherished only by the stupid.


5. Sex, Alcohol, Politics & Rankings

Here’s one that MBA students didn’t see coming. In June 2014, Bloomberg Businessweek, whose biennial rankings of business schools are highly respected, kicked up a storm when it asked inappropriate questions of students in its survey that contributed to its rankings.

Students were so outraged when they were asked questions about alcohol consumption, hookups, sexual preferences and political views that Businessweek was forced to drop 10 questions from its survey.

Just why did the magazine ask students questions like: “Is your MBA program a good place for a single person to find casual dating partners?” or “Do you identify as lesbian, gay or bisexual?”

It claims students had reported that school culture is as important as academics when it comes to an MBA program. While that may be true, crossing the line with what the magazine innocuously called “lifestyle questions” is shocking.

Its rather nonchalant explanation for its faux pas – that the rankings were being updated by newcomers who had little experience in covering business schools – just does not wash, and in fact put a big, fat question mark over the methodology used by the magazine to arrive at its rankings.


6. Pure Genius?

Let’s round off our two-part series with the canniest con of them all – a genius impersonator called Lu Xu – who defrauded those who administer the GMAT test as well as business schools who use it as a standard admission test.

For six years, Xu took the GMAT and GRE texts more than 500 times, of which the FBI and New York State police have him on record for 212 turns. With his IQ and ability to rack up a score of 750, Xu made a killing by trading his genius for money. Using disguises, fake identification, and sometimes even dressed as a woman, Xu would walk into test centres, ace the exams and then laugh all the way to the bank.

But the Chinese-born Xu is no ordinary con; he has many degrees to his name. After he arrived in the US in 1994 as a PhD student in Biochemistry, he earned an MA, an MBA and an MD. He was also a Chemistry teacher for City College in New York, as well as a research scientist in the Department of Molecular Biology at Mount Sinai Medical Center.

Looks like all those degrees were not enough grist for his mill for Xu began taking the GMAT test just to challenge himself. Somewhere down the line, this personal challenge got confused with commercial considerations and the young student began taking the test for MBA hopefuls, at $3,000-5,000 apiece.

No doubt, he grew rich but, in 2004, Xu’s luck ran out and he was caught, indicted and jailed for just under three years. This self-proclaimed ‘GMAT Hero’ now uses his genius and jail time as a calling card to promote himself as a tutor of the GMAT exam.

Lu Xu is a reminder that GMAT scores can be tainted, as they were in 2008, when the scores of 84 candidates were declared void by the Graduate Management Admission Council, which administers the exam. At the heart of the cheating scandal was a test-prep website,, that was posting ‘live’ GMAT questions.

The GMAC shut down the site and sued its owners for copyright infringement but the development left business schools on the horns of a dilemma – what about the 84 ‘tainted students’ they had already admitted and, worse still, those who had already graduated? GMAC gave the 84 ‘cheaters’ a chance to take the test again but it was a while before the thorny matter was resolved.

Sources: Sex Scandal (1, 2, 3, 4, 5, 6), Rankings Scandal (1, 2, 3, 4, 5, 6), Gender Bias (1, 2), Cheating Scandal (1, 2), Rankings Scandal (1), GMAT Cheating Scandals (1, 2) | Image Source: Bloomberg.

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