Business Schools’ Grades Non-Disclosure Policies: Paradise for Free Riders or a Smart Policy Acceler

Published: 09th January 2012
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Students in many leading Master of Business Administration (MBA) programs have grades non-disclosure policies. These policies are distinctive in that they mainly exist in MBA programs and not in other professional programs including medicine, law, and accounting.

A new study by Daniel Gottlieb and Kent Smetters from the National Center of Economic Research attempts to uncover the motivation behind business schools’ non-disclosure policies.

Below we present some interesting points from their research and provide some additional insights into this phenomenon.

Since grades are the property of students and not schools, students can vote to create
a “social norm” of grade non-disclosure to potential employers. While individual students
are legally allowed to break ranks and disclose their individual grades, they generally do not. Moreover, employers (often including alumni) typically do not ask for grade information at schools where students have endorsed non-disclosure.

Grade non-disclosure policies in MBA programs are concentrated within highly-ranked schools. A majority of the most selective 15 schools have a grade non-disclosure policy, while no school ranked 20 - 50 has such a policy.

A vote for non-disclosure, however, allows the voter with poor to average grades to essentially “free ride” off of the expected pooled wage. This is advantageous when there are many students who are more productive than this type of voter.

According to the research for plausible wage distributions, the desire to pool becomes more valuable to students at more selective schools. Researchers suggest that these policies don’t exist in other professional programs because these programs require certification, and therefore additional efforts, to achieve good grades. Therefore, non-disclosure policies in programs requiring certification are less important to students.

In some cases, school faculty members do not appear to openly oppose the non-disclosure policy students have approved. In other cases, like at Wharton, the faculty is fairly vocal in their opposition to the policy, which a large majority of students (about 95%) generally approve each year.

In some schools, non-disclosure is an official policy. At Harvard Business School for example, grade non-disclosure is considered an official school policy. The administration requires students to accept grade non-disclosure before matriculation.
Students’ attitudes towards this non-disclosure policy are not clear.
Students at Wharton and many other top-tier programs argue that non-disclosure allows them to take greater risks and harder courses without fear of having an embarrassing transcript. In practice, self-reported levels of learning effort have fallen significantly since the introduction of grade non-disclosure in January 2005.

The former president of the student association at the Chicago Booth School of Business, April Park, argued that “grade non-disclosure allows students to take more challenging courses instead of taking classes for which they are over-qualified.”

In addition, it is important to understand that at the top MBA programs, very competitive and time-consuming recruiting processes occur during the academic year. Interviews, including ones conducted off campus, often take place during exam or class time. Therefore students who naturally would put a lot of effort into their studies are prevented from doing so from a program structure point of view.

Business education is also different from other programs as it requires development of top notch social skills. Networking, leadership development programs, participation in clubs and social activities may be as important as achieving good grades in top MBA programs.

Those who oppose the non-disclosure policy also have good arguments. According to the chairman of Harvard’s MBA program Richard Ruback, “Numerous students had claimed that the non-disclosure policy resulted in little motivation to excel.” As a Stanford GSB student puts it, “The grade non-disclosure policy is somewhat of a curse because it inspires a noticeable amount of apathy among the students. Class participation is good enough, but not as great as it could be if students were a little more compelled to prepare.”

While business schools’ non-disclosure policies may be controversial, business schools with a grade non-disclosure norm typically have some method of revealing the very best students. This revelation usually takes the form of awards and honors. Moreover, at Chicago’s Booth School of Business, where grade non-disclosure is the norm, MBA students also openly compete to earn teaching assistant positions, which are viewed as an indicator of excellent performance.

Overall, we believe that, on balance, a non-disclosure policy combined with a system of awards is a good compromise. It allows students to take more risks and be more successful in their recruiting efforts, and it empowers schools to distinguish students who deserve be noticed for their academic excellence.
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