Arjay Miller Thinks Business Schools Should Stress Ethics, but the Bottom Line Isn't Bad: His Grads Start at $27,500

In an otherwise depressed job market, June graduates with a master’s in business administration from a top university are in great demand. And not just for any job: The average starting salary for an M.B.A. is more than $20,000. At California’s Stanford University Graduate School of Business the median this year is $27,500, and the prime reason is its dean, Arjay Miller, 63. A formative figure in the field, Miller broadened the M.B.A. curriculum to include corporate ethics as well as government economic management and, in 10 years, turned Stanford into the nation’s top-ranked business school. (There were 5,000 applicants for the 310 openings in next fall’s class.) Dean Miller is not exactly a career academic, though, having served as president of the Ford Motor Company and on the board of such corporations as Levi Strauss, TWA and Wells Fargo.

Miller (his first name comes from the initials of his father, Rawley John) grew up on a farm in Shelby, Nebr., graduated with highest honors in economics from UCLA in 1937 and was working on his doctoral dissertation at Berkeley when World War II broke out. After three years in the Army Air Forces, Miller and nine fellow officers (including Robert S. McNamara) in 1946 were hired by Ford, where they were dubbed “the whiz kids.” Miller worked his way up the financial side of Ford to become president in 1963. He also, during the Detroit race riots of the 1960s, was the founding chairman of the local Economic Development Corporation formed to encourage black-owned businesses. But in 1969, after Henry Ford II had kicked Miller upstairs to vice-chairman at a time of sagging sales, Miller accepted an offer from Stanford. Miller and Frances, his wife of 38 years, have built a spacious house in Wood-side, a rural town near the campus. And this month, having achieved his aims, Dean Miller is retiring from the school but not from the world of business: He will remain on six corporate boards, including Ford’s. Just before his final commencement ceremony last week, Miller spoke with Nancy Faber of PEOPLE on the role of business schools in American government and life.

Aside from the obvious financial advantages, why is there such an interest in getting an M.B.A. degree?

In today’s competitive job market, the younger generation might still want to change the world, but they’ve found out that to do that you need skills. It isn’t enough to stage protest marches or carry signs anymore. The next step is to be effective, and for that an M.B.A. is valuable—like a union card.

Why are M.B.A.s in such demand?

When I was at Ford Motors the biggest problem I had was finding good management people. The 1,200 M.B.A.s we had working there—out of 440,000 employees—were the single best source of managerial talent. Our aim here at Stanford is simply to train leaders, not for now but for 10 to 15 years from now.

Why do you emphasize training people for government?

During the ’60s race riots, I realized that it was harder to be mayor of Detroit than it was to be president of Ford. Not only more difficult, but there was no training program for big-city mayors. The private enterprise system in this country does a good job of meeting demands for food or cars or radios. We need the same focus to get cleaner air and water and safer streets. We need to learn to work with scarce resources and reach objectives efficiently. That, in a nutshell, is what management is all about.

How many of your graduates are working in the public or nonprofit sector?

About 35 of the 310 graduating this year. Since our public management program is so new—the first graduating class was 1973—we are just getting started. There are five Stanford M.B.A.s right now at the super-grade level of civil service jobs, which can be considered similar to a vice-president in private industry.

But can government afford M.B.A.s?

With all the cutbacks, and the fallout from Proposition 13, there will be fewer government jobs available. That makes M.B.A.s all the more essential.

Why?

When government spending gets tighter you need someone who knows how to get more bang for a buck. Most legislators are lawyers. They make policy but they don’t know how to carry it through. Legislators pass laws to eliminate poverty or prevent crime, for example, then appropriate the money and sit back. But there is still poverty and crime. They say, “What happened?” An M.B.A. could provide the missing link. He not only knows how to set goals but he also knows how to get the job done.

How?

A trained manager could, say, set crime prevention goals; then he would also know how to deploy the police and the cost-effective way to do the job. It sounds so simple but it is not understood. Solid waste disposal, for example, costs some cities 20 percent more than other cities. The M.B.A. could go in and set up a more efficient system at a tremendous saving. There is a well-known politician who has become famous by saying government can’t do everything. Well, that is only the first step. The next step is the important one: What can be done? That is what we are teaching at Stanford, and I hope other business schools will follow our lead.

How do you decide who gets admitted to Stanford?

We use test scores, grades and references, but we cheat in favor of leadership potential. We can’t make a leader, but we can teach everything a leader has to know. The interesting fact is that only 14 percent of our students come directly from undergraduate colleges. Most of them have worked for two to six years. Their average age is 26. They have been out in the real world demonstrating what they can do.

What about women and minorities?

There were nine minority students and 10 women enrolled when I came in 1969. There are now 77 minority students and 146 women.

What place do you see for women in the business world?

I welcome the change in attitude. There is no difference in competency between men and women. I’ve always known that. My wife, Frances, is a brilliant woman—a Phi Beta Kappa who taught economics at UCLA. After we married she did what was expected and gave it all up. That certainly wouldn’t be the case today.

But, with this redress, are universities turning out too many M.B.A.s these days?

There were 6,400 M.B.A.s graduating in 1964 and some 50,000 in 1979. The graduates from top-ranked M.B.A. programs will always find good job opportunities. Our graduates average four offers each, but I worry for the others.

How much does it cost to get an M.B.A. at a leading school?

At Stanford the tuition is $5,130. We estimate it costs a single student $20, 000 for the two-year course—counting room and board, books and other expenses. For a married student with no children, it’s $27,000.

How does that cost get amortized?

One professor who keeps track reports that our graduates double their starting salary in five years and make three and a half times as much after 10 years. But only one other business school [Harvard] could approach these salaries. The rest would range downward from there.

Harvard President Derek Bok has announced that the “B school” curriculum there will be overhauled to stress business ethics and consumerism. What do you think of this?

President Bok has reached the same conclusion I did 12 years ago as president of Ford—no business school was doing an adequate job. In 1966 we corporate leaders were not prepared when the presidents of the automobile companies were called to testify before Congress on safety. We simply weren’t trained to cope with the political process. That must change.

How did running a business school compare with running Ford Motors?

Well, it isn’t the strict hierarchy here that you have in business. The faculty, students and alumni all have their say. At Ford, when the boss said something, that was it. Here I listen more and balance things out as opposed to laying it on the line.

Do you think that business can recapture the trust of the U.S. public?

Yes, I do. I accepted the position of dean at Stanford with the understanding that the curriculum be broadened to include social responsibilities. Business is, after all, pragmatic problem solving. It responds to public demands, and it is cleaning house as fast as possible. Business leaders are only just realizing the need for a broader response. That’s to pay attention to ethics, as well as profits.