Friday, May 02, 2008
JD-MBA Programs and the Shortcomings of Business Law Education
While I'm being a player-hater (one of my favorite occupations), let me dump a bit on joint JD-MBA programs. I don't think there's a lot of value in the joint degree. Consider the cost-benefit trade off. Students have to pay an extra year of tuition and forego an extra year of earnings. That's probably around a $250K cost for top-tier joint degree programs. My guess is that the cost alone means that primarily students of means do JD-MBAs.
What are the benefits of the joint degree? I don't think it helps much on the takhlis front. Students end up focusing on one or the other and then entering careers that utilize one skill set or the other. Students either go into business careers or law careers. They don't go into joint careers. Having an MBA doesn't help much as a junior associate at a firm and having a JD doesn't help much for entry-level business positions. Law firms don't hire people because they have MBAs, and my guess is that businesses don't hire people for non-legal positions because they have JDs (and don't hire them for legal positions absent practice experience). I don't think it helps a lot in terms of credentialing; maybe on the margins, but one has to be good enough to compete for the job anyhow. Perhaps the joint degree provides some extra status vis-a-vis peers in whichever field one goes into, but is that worth $250K? In any job, it would be years before one could significantly utilize both degrees and if one goes on the business track, having some legal training years ago isn't going to be particularly helpful and vice-versa.
I'd be curious to see the earnings of JD-MBAs compared with pure JDs and pure MBAs. My guess is that those who pursue law are indistinguishable from their pure-JD peers and those who pursue business are indistinguishable from their pure-MBA peers. Empirical research anyone?
It could be that the value of a JD-MBA is in the substantive knowledge acquired. But there is relatively little required substantive knowledge in either type of program. No one is hired for a law or business job because of the specific substance they learned in their program. Maybe the value is in the networking? But business people have little trouble finding lawyers, if they can pay, and it will be a while before MBA classmates are dishing out legal work (and that is probably a job reserved for the business's GC, a lawyer).
Perhaps the value of a JD-MBA is its androgeneity. Maybe it opens doors and allows a mid-career switch. One of my JD-MBA friends went from being a professionally unhappy i-banker to being a professionally unhappy corporate lawyer. The joint degree gave him some job security when things went bad for him on the street, but I think that was because he was relatively junior, only a few years out of school. He was still young and fresh enough that a law firm would take him as a junior associate and give him a year of extra standing for his banking experience. If he had been 10 years out, I don't know what law firm would hire him; certainly none would at anything close to the salary or responsibility that a lawyer with 10-years of experience could command. Lawyers go to business all the time after a few years in practice, so the MBA is hardly necessary to move in that direction. It seems to me, then that other than allowing a career shift shortly after graduation from business to law, there is little value to the JD-MBA.
[At my alma mater, she-who-shall-not-be-named, cognoscenti recognize that acceptance into the JD program opens the door to admission in the MBA program for students without business experience. Thus the JD-MBA there might be financially worthwhile since it allows the student to get MBA earning potential without putting in 2-3 years of entry-level business work before the MBA.]
I suspect that a fair number of JD-MBA students do the program because they are genuinely interested in both law and business and want to get an education in both. I don't know if they are aware that they will really have to choose one path or the other, at least initially. But law schools could perhaps satisfy some of the JD-MBA demand simply by offering better business educations to their students. Indeed, I think that a basic business education is pretty important for being a good lawyer. By this I mean fluency in the vocabulary of business, fluency in common deal documents and concepts, and a grounding in finance and accounting. (I shudder to think of law schools trying to teach the leadership and teamwork skills emphasized in some business programs.) Basic business vocabulary and concepts are not only useful for transactional attorneys; a lot of litigation practice involves understanding business issues.
For starters, law schools should really take teaching accounting much, much more seriously. It's like broccoli and Brussels sprouts, and I'm happy to play Mom and not let students have dessert (Icelandic Epics and the Law) until they've eaten a healthy dinner. Let me gore some oxen and state that its importance is far greater than Constitutional law for many lawyers' practices. There, I said it. Most attorneys are more likely to encounter an accounting issue than a first amendment issue. Going beyond that, law schools need to do a much better job of teaching students about common (and complex) business transactions and financial products, but more about that in a separate post.
Some schools have started teaching basic analytical methods courses to introduce students to basic concepts in economics and statistics, etc. I think that's great, although I wonder how much can be taught about any particular subject when only 2-4 class sessions are spent on it. A few other schools have a basic introductory finance/accounting class. That's a model that should really be expanded and required. (I'm not a big fan of the choose-your-own adventure model of legal education. Education is a setting where paternalism is quite appropriate, in part because students often don't know enough to make great choices, and often choose courses for the wrong reasons, e.g, class meeting times or ability to use laptops. But this is a much larger topic that I can address in this post.)
A required intro finance/accounting class allows more sophisticated and advanced teaching in upper level classes and ensures that students who don't take advance business law classes learn at least the basic business law concepts and skills. As much as I love UCC Article 9, I don't think it is important for most students to know its nitty-gritty details. But I think it is shameful that law schools send students into practice who do not know the difference between secured and unsecured debt and the importance of perfection. Likewise, students should be able to easily find and read 10-Ks, including the financials. And students should know that when a banker talks about drawing down on a revolver, he's probably not talking about cocking a six-gun.
Enough ranting. I'm sure I've stepped on enough toes here to open up a lively discussion. For full disclosure, I'm a pure JD and haven't taken any MBA courses and am happy to be proven wrong about the value of a joint degree. Also, my school doesn't have an analytical methods or basic business course, so I try to teach pieces of basic business in my bankruptcy and commercial law courses.
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Posted by Jeff Lipshaw Over at PrawfsBlawg, Adam Levitin (Georgetown, left) provoked a discussion on the value of the JD-MBA degree, as well as the general shortcomings of business law education. Let me throw in my two cents' worth. We [Read More]
Tracked on May 4, 2008 10:23:15 AM
What would you think of changing the first-year Contracts course to include an introduction to business concepts? There's a lot of common law in the basic contracts course that could be trimmed and replaced with more statutory analysis, basic finance and accounting concepts (e.g., what is an interest rate), and some transactional work. "Contracts and the Basics of Business Transactions" might be a better course for today's lawyers than the traditional common-law course.
Posted by: Matt Bodie | May 3, 2008 12:59:05 AM
Matt, I'm not too eager to push a business transactions component into a 1L contracts class. The common law part of the course is very valuable as a introduction to critical common law analysis. Also, there's already a lot of contract law that is missing from most 1L contract courses or not covered in sufficient depth, e.g., assignment and delegation, severability, recoupment. And I like to see a good dose of UCC Article 2 in 1L contracts. I don't know how one could add sufficient business concepts (going far beyond such basics as what is an interest rate) and still teach core contacts.
My temptation would be to eliminate any 1L electives (shocking!) and/or add to 2L requirements. Alternatively, for international law skeptics such as myself, perhaps the drive toward internationalism in the JD curriculum could be diverted to a more immediately practical (if somewhat less sexy) business law basics. Or if the Supreme Court ever bans the death penalty, it will free up at least 2 credits from substantive crim law courses. (This is not a policy endorsement, but a mere notation that many crim law curricula will be in trouble if the death penalty is banned).
Posted by: Adam Levitin | May 3, 2008 1:12:17 AM
"My guess is that the cost alone means that primarily students of means do JD-MBAs."
I wouldn't count on that, especially in the age of financial aid growth. When I go into my MBA program (which I wound up not doing), my need scholarship was much bigger than my law school aid. Then again, my GMAT was higher than my LSAT (percentile-wise), so maybe that had an effect.
I think you make a good point about the value of the program - as my econ advisor used to say, "Do it for consumption, and not for investment." I now wish I had done the program - there were a lot of things I could have gotten out of it, and it was really the only reasonable time in my life to take those classes, make those connections, and get that degree.
Posted by: Michael Risch | May 3, 2008 6:26:30 AM
This is a nice post, one of many. I completely agree with the four year thing ... it's only ever seemed to me that you should just get the MBA, because that's what most who get both end up doing. One question, however is whether we're at an equilibrium. Penn and Wharton are moving to a three year plus one summer MBA-JD. It doesn't come cheap, but it doesn't take a lot of time either. If you're going to be spending three years in school, why not get both? Would be the thinking there.
Posted by: David Zaring | May 3, 2008 8:47:43 AM
Adam -- I understand what you mean about the Contracts course, particularly if it's only four credits. We should cover topics like assignment and severability in more depth. But this is part of what I mean when I say the Contracts course should have more of a business focus. You could alter the course to focus almost entirely on business-related contracts, rather than the current hodge-podge of business, family, and personal contracts that make up the course. Many of the older cases in the Contracts course would never be litigated today -- or, at least, would not be litigated up to a state supreme court. It makes more sense to focus on the contracts litigation that is happening today. I fear that the bar exam drives a lot of the Contracts coverage, and the bar exam is very traditional in its focus. We should spend less time on consideration and more time on assignment. If we can sneak in some basic concepts like interest rates or assets vs. liabilities, all the better. But I agree that you shouldn't shoe-horn BA into Contracts. Rather, I'd just like to see the course focus more on modern business transactions, and tone down some of the Langdell-era focus.
I have mixed feelings about the UCC coverage. I believe the material is very important; I'm just not sure it gets the attention it deserves in a four or five credit Contracts class. But then again, pedagogically it is useful to have a statutory regime in the Contracts class to contrast with the common law. In fact, I'd like to see more statutory analysis in Contracts. That's another aspect of those older Contracts cases -- today, many of those situations would be governed not by the common law, but by a statutory regime that has superseded it.
Posted by: Matt Bodie | May 3, 2008 9:25:42 AM
I would not disagree at all regarding the benefits of basic financial training for lawyers, but I would point out that joint degree programs are a valuable way of forming connections between schools that can lead to each offering important resources--like accounting for lawyers and contract law for MBAs--to the other.
More importantly, you failed to address one benefit of joint degrees: the introduction to another way of looking at the world. Law school is, at its core, about teaching students to think like lawyers, and as valuable as that is, it is not as valuable as knowing how to think like a lawyer and a marketing or finance specialist, or, to be more creative, a minister or a doctor. As my last clause suggests, I think there are better degrees to pair with a JD for this "additional life perspective" goal than an MBA, but the observation holds for any other training. Does the payoff justify the cost? Quantitatively, probably not, but my legal work is more rewarding and my client interactions richer for my graduate theological training.
Posted by: Matthew Phillips | May 3, 2008 1:52:07 PM
"Indeed, I think that a basic business education is pretty important for being a good lawyer. By this I mean fluency in the vocabulary of business, fluency in common deal documents and concepts, and a grounding in finance and accounting. (I shudder to think of law schools trying to teach the leadership and teamwork skills emphasized in some business programs.) Basic business vocabulary and concepts are not only useful for transactional attorneys; a lot of litigation practice involves understanding business issues."
This strikes me as very much focused on the big-firm world. Most people don't do that. Not to overgeneralize, but professors can sometimes forget this fact -- most professors go to schools where most of their friends ARE going into that world. Many of my friends, by contrast, are looking at family law, criminal defense, housing, and so on. This is not to say that divorce lawyers will never cross paths with the business-finance world, but I think it's a fair question to ask how many lawyers actually truly DO need to know this stuff.
Posted by: Jason | May 3, 2008 8:50:21 PM
Jason makes a fair point. I think my perspective is highly shaped by the career paths of my own law school classmates and my current students. In both cases there is a very strong big-firm bias. Different law schools feed students into very different career paths, and one-size-fits-all doesn't make a lot of sense. That said, it behooves students going to plaintiffs' side shops, housing, and/or doing main street commercial practices to be comfortable with finance.
3-years plus 1-summer certainly cuts down on the expense and opportunity cost. Then it's just a question of whether the b-school learning outweighs the value of 2L/3L years, and that's an open question--some students get a lot out of 2L/3L, but others don't.
Posted by: adam Levitin | May 3, 2008 10:24:16 PM
""My guess is that the cost alone means that primarily students of means do JD-MBAs.""
My thought is that rather than a JD-MBA, a student would be better served by going into a PhD/DBA doctorate in business. Takes about the same time, they pay you to go to school, the degree can actually be finished in 3 years, and the placement is 7 job openings for every five candidates (the holes are filled by econ and other program grads). Pick up the law degree after graduation, while you teach.
Posted by: Stephen M (Ethesis) | May 7, 2008 9:11:54 PM
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