Since the mid-1970's neoclassical economic theory has dominated business school thinking and teaching, based on an incorrect Homo economicus model of human behavior. Moreover, the neoclassical efficient markets hypothesis implies that a firm's stock price is the best overall measure of the firm's long-term value, so managerial incentives should be tied closely to stock market performance. This approach fails when managers can manipulating information flows that influence short term stock price movements. Neoclassical economic theory thus fosters a corporate culture that ignores the personal rewards and social responsibilities associated with managing a modern enterprise, and encourages an ethic of greedy materialism in which managers are expected to care only about personal financial reward, and in which such human character virtues as honesty and decency are not valued. I suggest that business schools promulgate a professional code of ethics similar to those promoted in law, education, science, and medicine.
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