Are MBAs passé? An American export whose teachings have little relevance to the real world of business? Or are they essential qualifications for future business leaders seeking a well-rounded CV? For John Wells, the new president of Swiss business school IMD, the answer is easy. Having studied physics at Oxford, the 55-year-old Brit later completed an MBA himself in 1979, and began an international career in business that included serving as a divisional CFO at PepsiCo twice as well as starting up two companies and being part of a management buy-in. In 2002, he returned to his alma mater to teach management practice. For the most part, he says, today’s business schools are serving their students well. Yet he has a sympathetic ear for critics of the MBA.

Wells agrees that business schools generally deserve low marks for churning out graduates with heads crammed with too much theory and too little practice. They have also nurtured legions of graduates who earn themselves the sobriquet “Mediocre But Arrogant” once they make it to corporate life. What’s more, he says, many schools have failed to update their curricula to reflect the changing skills needed by business, which today should include a good grounding in ethics and corporate social responsibility. As he contends, academics are partly to blame — many having “hijacked” business education and making it self-serving rather than a means of improving business practice.

But there’s reason for optimism: “Some schools are interested in being rigorous and relevant. I believe IMD is bang on in that area and that’s why I’m here,” he says. Here, Wells discusses the state of the MBA and offers advice to CFOs who plan to tap the class of 2008.

You were once a divisional CFO at PepsiCo. From a CFO’s perspective, what do you think of the quality of today’s MBA graduates? Do they serve the needs of finance chiefs?

When I started in finance many years ago, the CFO was very much the conscience of the organisation, but he didn’t really have a chair at the strategy table. That limitation was removed by an MBA education, which trained you to take a general management view and generate strategy. So the influence of the CFO increased significantly. However, it got to the point where people who had MBAs but no accounting qualifications were actually being made CFOs of public companies. That’s a problem.

So pressures — such as big options packages that focus everybody in the organisation on short-term stock prices — might influence people not to present a fair view [of their company’s performance] and “non-accountant” CFOs are unable to see if it’s a true and fair view. It’s little surprise to me, in these circumstances, that we got instances like Enron, where the role of financial engineering to mislead shareholders was absolutely staggering.

Now you can simulate that experience at business schools, but there’s nothing like having to audit, then run [a business], and then have external auditors come in to give you a nose for whether something’s right or wrong. Schools, generally speaking, only teach the rudiments of accounting. I don’t think they can do much more than that. [But I also] don’t think, on average, they do a good job on the complexity of financial instruments and the risks they create on both sides of the balance sheet.

The MBA acronym has attracted many negative alternatives. Kjell Nordström and Jonas Ridderstråle — two Swedish management professors — have replaced “Master of Business Administration” with “Mediocre But Arrogant.” Do you sympathise with such views?

To be an effective and responsible leader, you have to have humility and openness to learning. Graduating MBAs would do well to remember that they are at the beginning of a journey and they will be learning all of their lives. But some people are arrogant and some schools encourage that arrogance.

Are MBAs becoming so commonplace that they’re losing their value?

In Europe there are ever more schools offering MBAs, just as what happened in the US. There’s a shakeout starting in the US now.

I’m absolutely sure that there are too many mediocre MBAs out there and not enough top-level MBAs. The demand for top-level MBAs is very high so they are not losing their value. Recruiters just have to be very selective about the MBAs they choose and the schools they choose them from.

The other thing is that even some top schools are dropping their standards by reducing the age of their intake. That’s happening for two reasons — first, to increase the candidate pool and second, [because] their junior faculty often cannot teach experienced MBAs. Experienced MBAs already have five years’ business experience so they might know more than the faculty.

So a company that hires MBAs without doing its homework is a relatively unsophisticated company. Buyer beware. At IMD, our MBA programme focuses on students with four to ten years of work experience and we will stay focused on that model.

How can you persuade business leaders — including CFOs — that MBAs for their top teams are still worth investing in?

I have no intention of attempting to persuade business leaders to take anyone who’s got an MBA. I can’t. Some MBAs are worth investing in and some are not. You could probably go onto the web and buy an MBA for $100 — I don’t think that makes you an MBA. Many MBA programmes are excellent but that said, it doesn’t necessarily mean that’s what a company needs.

I was talking recently to some people in China whose company needed quite a few elements of an MBA programme but not all of them. If that’s what they choose to invest in to develop their people, why not take up a customised programme? Companies are becoming pretty savvy about their requirements and it’s our job to advise them on what they do and don’t need. Automatically assuming they need an MBA doesn’t make any sense.

As CFO Europe celebrates its tenth anniversary, how has finance education changed over the past decade and how will it develop over the next one?

It used to be that if you understood the capital asset pricing model, that was fine for finance. Now, most people understand Black-Scholes and financial options — techniques have become more sophisticated in line with market needs and I see that trend continuing. As a result of more complex instruments and more complex processes, we face more complex regulation and I think that’s entirely appropriate.

The debacles we’re seeing today only illustrate that point. So the CFO has to understand compliance and regulation and [business schools] really need to help them to do that. But at the end of the day, there’s no limit to the creative mind. There is no regulation that you could ever put in place that is going to stop abuse.

It’s going to become even more important to instil the values of a true and fair view and responsible, effective leadership. A CFO’s role is really tough now but for the talented, the future is very bright.

View Rank and file: Top 15 full-time global MBA programmes.