The Golden Passport

by Duff McDonald

  One AMP graduate towers above all others: Indian industrialist Ratan Tata (AMP ’75). In January 2014, the School opened the 150,000-square-foot Tata Hall, a combined classroom and dormitory building named in honor of Tata, who contributed $50 million in 2010 for its construction. HBS knows a good mark when they see one: All the way back in 1995, Tata received the School’s highest honor, the Alumni Achievement Award, a distinction rarely bestowed on AMP alumni. (IBJ’s Kaneo Nakamura also received one, in 1985—the year after IBJ endowed its chair. Alumni achievement indeed.)

  But the dedication of the new building was fraught with nonsense. Ratan Tata called the time he spent in AMP as “the most important thirteen weeks of my life,” and the gift an opportunity to “give back to Harvard a little bit of what it gave to me.” This from a man who had been born into one of India’s richest families. On the same occasion, HBS dean Nitin Nohria referred to the Tata Group as being “widely respected for integrity.” That may have been true, but that it was said by the dean of a business school who was at risk of compromising his own integrity by accepting a board position from that same company was more than a little ironic.

  That April, the School broke ground on another Executive Education building, the Ruth Mulan Chu Chao Center, built with a $40 million gift from the Chao family. The center is the first building on the HBS campus to honor a woman. Although no one in the family took an Executive Education course, the Chaos stand out for their clear love of HBS: Four of Ruth Chao’s six daughters received an MBA from the School, including Elaine Chao (MBA ’79), the U.S. secretary of labor from 2001 to 2009.

  The program has continued to evolve over the years, in part because so many recent rising managers already have MBAs and therefore no need of an AMP certificate. There’s that, and the fact that business schools are not the only ones educating executives anymore—it’s done at corporate universities, by consulting firms, and anyone else who can get their foot in HR’s door. In recent years, the School has focused on attracting more international students, which historically had made up only about 10 to 15 percent of any class—in 2014, more than half of its open-enrollment students came from abroad. More tailored, company-specific programs have been added to the mix, as well as all manner of single- or several-day courses to keep the money coming in the door as the industry fragments.

  Besides the obvious challenge brought about by simple math—the more courses HBS offers, the more courses its teachers must teach—the explosion in executive education has presented its own unique challenges, including the fact that executives are far less tolerant of novice professors (especially those with a pure academic background), which puts increased demands on the School’s more experienced faculty.

  And those increases, it should be noted, show no sign of abating: In 2015, the School shoved more than ten thousand executives through 79 different programs in its Executive Education pipeline, bringing in $168 million in revenues. Such numbers make it difficult to come to any other conclusion than that HBS’s Executive Education program is driven almost entirely by commercial imperatives as opposed to academic ones.20 (The MBA program brought in almost $50 million less, or $120 million.) But the sky is the limit. One recent calculation put the total amount spent annually on executive development at $250 billion, a mind-boggling sum leadership guru Warren Bennis described as “The Great Training Robbery.”21

  Even with the addition of such frivolities as assigned professional “coaches,” nutritionists, and personal trainers, the program’s margins remain well above that of the MBA program, making it one of two financial anchors (the other being the School’s publishing business, which brought in $203 million) of the entire operation. For now and the foreseeable future, HBS continues to profit handsomely from selling its name to middle managers around the world. All they have to do is drop by, drop off the check, take a quick quiz or two, and be on their way.

  18

  Temporary Support of the Workingman

  Of the many educational experiments HBS has tried over the years, one stands out for its uniqueness—the School’s Trade Union Fellowship Program, or TUP. Originally offered in conjunction with Harvard’s School of Public Administration and the Department of Economics, the initiative, which provided selected labor leaders the chance to spend nine months at Harvard, is the only meaningful acknowledgment in the history of HBS that there might be a point of view other than that of “management” that might be worth considering. Even more remarkable is the fact that said acknowledgment lasted forty years, at which point the election of Ronald Reagan drove a stake through its heart, and the Business School ceased participating in the program. But that’s getting ahead of the story.

  On September 23, 1942, the New York Times expressed the novelty in just seven words: “Union Men to Take a Harvard Course.”1 Described as “part of a program to bring about an improved relationship between labor and industry, both during the present day and in dealing with the problems that will confront the nation after the war,” the “experimental” course drew thirteen labor leaders representing unions of railway clerks, hatters, electricians, and women’s garment workers in its inaugural year.

  HBS professor Sumner H. Slichter was the informal head of the program, which included three required courses—Economic Analysis, Trade Union Problems and Policy, and Human Problems of Administration2—as well as electives. While HBS had been gradually dialing up its admissions requirements over the years, in the case of the TUP, they were dialed back down: attendees weren’t even required to have completed a high school education, and the fellowship recipients were chosen by the unions themselves. HBS even agreed to split the cost of tuition.

  Escalating strikes and labor unrest in 1941 underlined the need for improved relations between labor and management, not to mention the international crisis that threatened to pull America in at any moment. But HBS wasn’t just playing nice with its fellow Americans at a time of impending war. Union organizing campaigns of the 1930s, combined with various labor-friendly aspects of the New Deal, had resulted in a marked increase in union power that wouldn’t reach its peak until the 1950s. Between 1934 and 1939, “union density” in the United States workforce had surged from 11.5 percent to 27.6 percent. (After a slight decline, it surged again, to 34.2 percent in 1945.)3

  In One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy, Thomas Frank points out that by the time unions had successfully fought their way into the workplace, a management clique that had been bitterly opposed to their arrival suddenly realized there was a silver lining to it: By attaching their more democratic structure to the otherwise authoritarian corporation, the unions had lent corporations legitimacy and “the corporation ceased to be the terrifying dictatorship that had once so alarmed Americans.”4

  In at least one sense, too, historical roles had been reversed: At a time when corporations were desperately trying to downplay their power, the unions were flaunting theirs. The invitation to send their members to HBS only served to confirm that they had finally arrived as a legitimate force in corporate affairs. And just as corporations had gotten infinitely more complex as they had grown, so too had unions, and labor leaders realized that a little management training could be very helpful, to a point. Kenneth Taylor, secretary-treasurer of the Massachusetts Federation of Labor, called the plan “very, very good—if the men don’t come out of there with a Harvard accent.”5

  There were particularly high hopes for one aspect of TUP: a series of joint classes with managers in the Advanced Management Program. If labor leaders weren’t going to sit down with big-company CEOs themselves, they were going to sit down with their sons, an opportunity one fellow described as getting “an insight into how papa’s mind works.”6 But the reverse held true, too. In 1955, according to one union member, “We were told that many of these top management men had never before met a labor official. [F]rom some of the questions asked . . . I am sure that all they knew about labor was what they read in
our reactionary papers.”7 That applied equally to the faculty as well.

  As has happened with several of the School’s executive education programs over the years, the School decided to shorten TUP to a single thirteen-week session in 1948, and then added another in 1952. But the faculty commitment, especially from other schools at Harvard, remained strong. Over the years, TUP also resulted in a number of firsts at HBS and Harvard that had nothing to do with labor-management relations. It was the first program at HBS to include female students. Joseph O’Donnell, the executive director of TUP from 1955 to 1985, was a Catholic, one of the few program leaders in the entire history of Harvard who wasn’t a white Anglo-Saxon Protestant, or WASP.

  A flood of international trade unionists during the 1950s also put it ahead of the rest of HBS in terms of its foreign embrace, although later revelations of CIA involvement raise fundamental questions about the whole point of the program. In the early years of the Cold War, the national spy agency had supported conservative trade unions in Europe and Latin America, and it found a perfect vehicle to help them do so in TUP. An early 1970s brochure for TUP almost said it out loud: “Overseas candidates are selected by the United States Departments of State and Labor and the United States Agency for International Development.”8 That last one, USAID, enjoys the dubious distinction of being a well-known front operation for the CIA.

  TUP never grew to the size of any of HBS’s other programs, and union participation waxed and waned enough that the School eventually lost sight of the “exciting possibilities”9 Dean David had described at its outset. So it was that in 1957, a year after the largest attendance in TUP’s fifteen-year history, Dean Stanley Teele described TUP’s future as “still in doubt.” But that doubt was emanating from one place, and one place only: HBS, specifically, an administration that was hungry for a greater return-on-investment than the program generated, and AMP and PMD student bodies that were unable (and likely uninterested) in finding common ground with their labor peers. But in HBS’s official history, the blame for that inability was laid squarely at labor’s feet: “The steady improvement in the number and caliber of the [AMP’s] participants . . . led to troublesome imbalance between the two programs.”10

  In 1969, then-dean George P. Baker did as HBS administrators have long done when they have failed to figure out how to teach something of import—he described that failure as if it were being done to them, not perpetrated by them: “[The] Program . . . lacks real dynamism. . . . I feel that serious consideration should be given to whether there may not be another part of the University which would be interested in administering it . . . it [concerns] me to have such an undynamic program housed among the other programs of this School.”11 Dean John McArthur did likewise in 1981: “[We] lack adequate faculty resources to support the research and teaching requirements at our standards.”12 They certainly weren’t going to get any money from HBS grads like Tom Murphy, whose Capital Cities was named by the AFL-CIO as the “most hard-line anti-union media company in the nation” in 1983.13

  Still, enough people outside HBS (and a few within it) saw dynamism in the program that it wasn’t until President Reagan took an explicitly combative view toward unions that McArthur was finally able to shake off responsibility for it. Reagan, of course, had taken on a much-weakened foe: After peaking near 35 percent in the mid-1950s, union membership had been declining for two decades before falling off a cliff in 1975, when it dipped below 25 percent.14 Many reasons have been put forth for the decline of unions in the United States, from structural changes in the economy (less manufacturing, more services), to corrupt union leadership and increased employer resistance, but in 1979 labor economist Peter Pestillo pointed to a factor that had implications at HBS itself: “The young worker thinks primarily of himself. We are experiencing the cult of the individual, and labor is taking a beating preaching the comfort of coalition.”15

  At HBS, that cult was steering graduates away from industries with a heavy union presence and toward the likes of financial services, consulting, and technology. With that in mind, McArthur asked that the program be airlifted out of Soldiers Field. They did, however, choose to keep much of its endowment, leaving those overseeing its continuation to deal with a major financial challenge out of the gate.16 As for HBS, it was left free from having to feign interest in the concerns of anyone but those of management. (Remnants of the TUP live on as part of a broader program at Harvard Law School called the Labor & Worklife Program. It says something that even after being hobbled by the endowment grab, the program flourished once free from HBS.)

  As an indication of where HBS thinking really was at the time, one need look no further than what is surely the most tone-deaf book ever to come out of HBS, 1990’s Inside the Harvard Business School: Strategies and Lessons of America’s Leading School of Business, by David W. Ewing, former managing editor of the Harvard Business Review. To his credit, Ewing admits that “[m]ost instructors I know in finance and control have a bias against unions (though they may not admit it publicly).” But he follows that with an argument remarkable for what it reveals: “They may admire unions’ efforts to stand up for workers against excessive managerial demands. . . . On balance, however, they see unions as restricting and constricting management’s freedom to manage as it sees best, with all that means for efficiency in global economic competition.”17

  A curious thing about HBS is how its professors, in teaching management, have come to truly believe in the management point of view itself. While it isn’t that difficult to see why management itself sees unions as “restricting and constricting,” one wonders why it must then follow that a professor of management must see unions in the same way. This is a crucial issue in the history of HBS. At some point, its faculty decided, consciously or not, that its job was not to continually question the nature of the firm or of management, but to simply accept them as given. The implications of that decision become obvious when Ewing articulates the late 1980s students’ point of view: “I remember one class where the consensus was clear that over the years unions have negotiated wage levels that far exceed the levels that would develop in a freely competitive workplace. These high wages have to come out of the hide of capital because the steel companies compete against foreign producers and cannot simply pass their labor costs on.” All of this leads Ewing to conclude, with a comically incorrect air of dispassionate inquiry, that while such bias “may arise from personal beliefs and ideologies . . . it also is empirical.”18

  Ewing also rewrites U.S. labor-management history as one would expect it to be revised by professors-cum-management-courtiers, with management the victim of labor’s intransigence, and not the other way around. “In the United States, the unions were born in adversity, and when their strength rose in the 1930s and 1940s, they continued acting as opponents of management, creating webs of rules that often immobilized management and crippled productivity. . . . By the 1960s this anti-management posture was beginning to boomerang on the unions as plants became less competitive in world markets and jobs were lost.” And then antilabor’s favorite canard: “By the 1970s and 1980s, traditional union attitudes were playing a major role in the declining fortunes of many American manufacturers.”

  By the end of the twentieth century, union power had been decimated to such a degree that when American CEOs needed to cut costs, they simply fired workers and hired them back as temps, eliminating costly benefits in the process. As Thomas Frank observes, there was one condition under which even the most doctrinaire neoclassical economists were willing to accept that wage increases were justified: when overall productivity was growing. But having neutered unions, American managers decided to sever that tie, too. American productivity shot through the roof at the end of the twentieth century, but wages remained stagnant. “The advances were funneled directly into stock prices,” writes Frank. “The people who got richer as workers became more productive were stockholders.”19

  And that has led to an increase in inequality to le
vels not seen in a century. In The Price of Inequality, economist Joseph Stiglitz points out that when unions were strongest in America—the three decades between 1949 and 1980—productivity and real hourly compensation moved together in manufacturing.20 But then the link was broken, and wages stopped growing, except for those at the very top. What followed is nothing short of obscene: Between 1978 and 2013, according to the Economic Policy Institute, CEO compensation increased by 937 percent, more than double the stock market’s growth and almost 100 times greater than the typical worker’s compensation increase of just 10.2 percent. The CEO-to-worker compensation ratio, which was just 20-to-1 in 1965, hit 511-to-1 in 2013.21

  In light of the evidence that in recent decades the spiraling cost for corporations has come from the top of the organizational chart and not from the bottom, it’s nothing short of remarkable that the idea that unions are bad for business has simply become an accepted truth. This despite the fact that Ewing’s “empirical” proof doesn’t actually exist. In 2015, Professor Richard B. Freeman, a Harvard labor expert, listed for the New York Times the benefits that unions can bring to industry: improved morale, reduced turnover, and increased suggestions of productivity improvements. As for the costs of too much union? “If you’re looking for big negatives, everybody knows they don’t exist,” Freeman said. 22