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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Peter Tufano is a professor at Harvard Business School and former dean of Saïd Business School at the University of Oxford
For decades, businesses and business schools have accepted Milton Friedman’s maxim that a corporation’s purpose is to “increase its profits” while obeying the “rules of the game”. For many, the law is the only substantive guardrail. But with that safeguard being weakened every day, today’s leaders and educators need to reflect and act.
In the US, federal guardrails are being dismantled, with wholesale relaxation or rollbacks of product safety laws; environmental, pollution and climate laws; restrictions on abusive tax shelters; protections for workers’ rights to organise; and even laws against bribery and corruption. In important sectors such as AI, there are few laws and less appetite to write them. Elsewhere, a pay-to-play mentality suggests that anything goes.
Put simply, US federal law — a key rule of the game — has been weakened. This is an outcome that many conservatives and libertarians have lobbied, prayed and paid for over many decades.
A new economic calculus might suggest that business can boost profits by polluting more, offering less-safe products and workplaces, or even bribing. We cannot count on competition to prevent these outcomes, because it can lead to a race to the bottom, especially when corner-cutting is not obvious to stakeholders.
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However, there is a third framework that goes beyond law and economics and has a long history: ethics — a concept integral to Adam Smith’s 1759 “other” seminal book, The Theory of Moral Sentiments. Even President Trump, rejecting international law as a limit on his behaviour, recognises that the only boundary he faces is “My own morality. My own mind. It’s the only thing that can stop me.”
If so, ethics seems like an important part of education for a leader. But it was never part of my economics training nor is it core in modern finance curricula.
But as business leaders retool for a lawless world, ethics seems especially important. The course that I teach along with eight colleagues at Harvard Business School seeks to prepare students to lead with fewer legal guardrails and to operationalise “moral sentiments”.
Leadership and corporate accountability (LCA) has been for two decades a mandatory requirement of our MBA, alongside finance, marketing, accounting — and now AI. In LCA, students assess business decisions through three lenses: economic, legal and ethical.
The first of these is obvious, as businesses must make profitable decisions. We then ask students: “What does the law require? It may be legal, but is it ethical? What do we mean by ethical? How will these insights guide our actions?” We provoke with dated language: “Striving to do right.” We reference the first HBS dean, Edwin Gay’s observation that businesses should “make decent profits decently”. We challenge students to wrestle with the trade-off between higher profits and decent behaviour.
Students often intuit that something does not seem “right” but struggle to explain their discomfort. We can give them language and logic to think in a more disciplined way, but we do not teach what is “right” or “wrong”. That is the students’ job. We cannot be in the rooms where hard decisions will be made. But we do ask complex questions that even AI cannot comfortably answer — for example, in a teaching case-study about a payment by a company in the pharma sector to a charity led by a government employee:
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Based on your reading of today’s case, was this a gift or a bribe? How does it line up with the criteria under the Foreign Corrupt Practices Act (FCPA)?
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Who or what is harmed by bribery? Did they choose to be harmed? Were they informed? Are we violating their rights — or breaching legitimate expectations or weakening legitimate institutions? What is “legitimate”?
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On February 10, 2025, the Trump administration paused the enforcement of FCPA. Read this announcement. What does it mean? What do you do now?
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On June 9, 2025, the Department of Justice announced that it would resume enforcement, prioritising prosecutions that “resulted in economic injury to specific and identifiable American companies or individuals”. What does this imply? While this is a change in the law, does it change who or what is harmed or benefited? If the gift had been proposed in August 2025, what would you do? Why?
In short, what are the consequences of your decisions — to consumers, employees, communities, institutions, nations, democracy and the planet? We challenge students to ask: “Why exactly do I believe that?”
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LCA is an intense course. Students are frustrated as they struggle to articulate their values, they disagree, and they yearn for clear answers. Practice may not make perfect, but the limited research on ethics education — or simply considering in advance what you might do in complicated situations — suggests that practice can help people prepare for fraught decisions.
These are not just classroom concerns. Business leaders are increasingly wondering: “I can, but should I?” With understatement, a seasoned member of numerous company boards remarked to me, “Ethics? I need to understand whether it’s worth the trouble.” Introspection is critical as legal guardrails are dismantled. Quaint ideas such as decency may have renewed importance.
During the 1950s McCarthy hearings, individuals were branded as communists and blacklisted, often without evidence. The US witnessed a period of darkness. In 1954, a Boston lawyer confronted Senator McCarthy: “Until this moment, Senator, I think I never really gauged your cruelty or your recklessness . . . Have you no sense of decency?” It was not McCarthy — but rather others — who needed to realise that decency was not an empty concept.
