Can a Business School Die of Shame?

Stanford Graduate School of Business is one of two MBA programs in the United States to claim that it exclusively offers need-based financial aid. This has now been exposed to be untrue. Earlier this year, more than 14 terabytes of the school’s highly confidential financial aid information, spanning seven years of applications, were found unsecured on a public server. Subsequent analysis of that information by an intrepid student published on 1 December, revealed not only that the administration of Stanford GSB had misled applicants, students, and alumni in its claim that “all fellowships are need-based,” but that it also discriminated in the awarding of financial aid in the most regressive way possible: by giving more to wealthier students in the hopes of wooing them to campus. Specifically, it is alleged that the greatest benefit went to those students from finance backgrounds who were most likely to secure jobs in private equity, thereby raising the school’s post-MBA starting salary statistic, and therefore help its performance in rankings of MBA programs. The analysis also showed systemic bias in the gender and national origin of students in the amounts awarded.

We feel a tremendous amount of sympathy to our peers at Stanford GSB because had this happened at HBS, there is no doubt that our student body would be outraged beyond words. Not only is regressive economic discrimination in financial aid a breathtaking breach of trust, and a shocking disaffirmation of the school’s purported egalitarian values, but we believe that it also represents gross negligence by the Stanford Administration in their duty to uphold the most important element of any elite business school degree: the school’s brand.

Brands derive their power based on trust, authenticity, and alignment with customer values. Food made by General Mills must be safe to eat no matter what — public trust in Cheerios is such that it is the first solid food many parents give to their children. The ice cream company Ben & Jerry’s is now managed by the transnational conglomerate Unilever, yet its fierce authenticity to its values lead consumers to patronize and defend its scoop shops with a fervor usually reserved for local independent coffee establishments. Drivers who buy Ford trucks believe that their choice says something about their values that a Chevrolet cannot.

The recent practices of Stanford’s Financial Aid department are a serious blow to the brand of the school on each of these three dimensions. These revelations may cause alumni apprehension when donating to GSB for fear that their dollars will not be used as represented. Students seeking the intimacy of a program less than half the size of HBS may wonder if they can trust the administration to treat them fairly. Applicants seeking financial aid may shy away from programs that intentionally put them further out of their reach. In aggregate, these concerns may cause lasting damage to the school — damage perhaps far greater than any external actor could muster.

The response offered by Stanford administration offers a case study to MBA students in exactly what they should not do when in damage control. In seeking to explain the episode, Stanford GSB Dean John Levin diverted attention away from the core objection, focusing almost exclusively on the issue of the data security — a serious technical breach of confidence to be sure, but one that pales in comparison to the revealed compromise in school values. In the few words he does devote to the true problem of the administration’s conduct, Dean Levin minimizes the systemic gender, economic, and national origin discrimination as a mere miscommunication about “base level” versus “incremental” fellowship awards. Instead of showing leadership by taking responsibility for these shortcomings, he offers only the vague promise to be “significantly more transparent about the principles and objectives being applied in making financial aid awards.”

What are those objectives, exactly? In that same statement Dean Levin explains that “the school has offered additional fellowship awards to candidates whose biographies make them particularly compelling and competitive in trying to attract a diverse class.” We have already seen that that group includes those who previously worked in finance who can help Stanford’s position on MBA program rankings by virtue of their high post-MBA salaries. But another set of students come to mind as likely beneficiaries of Stanford’s largesse: the prospective students who were also admitted to other top-tier business schools.

If these allegations are true and these implications are correct, then the administrators of Stanford GSB are saying loud and clear that they value their school’s competitive position vs. its peers more highly than they do the promises they make to its own students. It remains to be seen what the long-term effects to Stanford’s brand will be, but we hope that administrators from all MBA programs will look upon these allegations as a perfect case study for trust in branding: that of the bad protagonist.

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Written by the editorial team

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