Prince Charles calls for pensions industry ‘fit for 21st century’

By Anna Tilba, Newcastle University Business School

Speaking to a conference of National Association of Pension Funds, Prince Charles voiced his concerns over whether Britain’s’ pension system is built to cope with its ageing population. He emphasised that it is pension funds’ duty to manage environmental, social and economic risks and to change the culture of ‘quarterly capitalism,’ which is unfit for purpose. Prince Charles left it up to pension funds to ‘help shape a system designed for the 21st century and not 19th century’.

Having spent over seven years researching pension fund governance and investment, I would say that yes, change is needed but it is unrealistic that this change will happen, due to issues around pension fund liabilities, complexity of pension fund investment, demographic changes and the current economic climate.
‘Quarterly capitalism’ whereby businesses pursue short term aims for short term gains at the end of each financial quarter, is the sign of our challenging economic times.

Firstly, there are issues around how trustees interpret their duty. The UK legal trust tradition, which gives pension fund trustees the power and the fiduciary duty to act in the best interests of pension fund members, means that trustees -on the most part- interpret that duty as acting in the best financial interests. My recent research into UK pension fund investment practices suggests that trustees’ interpretation of their fiduciary duty of care is a core guiding principal, which informs pension fund investment strategies and actually discourages share-owner and stewardship activities.

Increasing complexity with pension fund investment chain means that in practice, pension funds are far removed from the corporations in which they hold shares. Many delegate all to do with pension fund investments to financial intermediaries who themselves are focused on share trading, rather than responsible shared ownership. The complexity of pension fund investment and an increasing regulatory burden also means that trustees are too busy dealing with pension fund governance and compliance, rather than with monitoring investee corporations and accounting for environmental, social and governance risks.

Furthermore, pension funds are currently operating in an environment characterised by economic recession and unstable, and complex, financial markets. Sadly, pension fund finances are now suffering a double financial blow: one from falls in stock markets and another dealt by the economic recession, impacting on cash flows and pension contributions of the sponsoring companies and local authority councils.

According to the latest figures, pension fund funding deteriorated significantly between March 2011 and March 2012 – the funding ratio (assets divided by liabilities) also fell from 100 per cent to 83 per cent (The Purple Book, 2012), putting more pressure on schemes to look for short-term investment returns to improve funding.

Pension funds are also operating in a world of increased human longevity and progressing pension fund maturity. Scientific data shows that life expectancy rose both in men and women: a 65-year-old man retiring today will, on average, live to 89. As a result of increased life expectancy, pension fund liabilities have soared to £1.702.6 billion with pensions deficits rising to £677.3 billion in 2012, from £470.7 billion a year earlier (The Purple Book, 2012).

Pension fund deficits have created a need for pension funds to match assets with liabilities, the so-called Liability Driven Investment (LDI) is putting more pressure on pension funds to rely on the market, volatile as it may be, to address the funding problem. Pension funds are forced to seek more short-term investment solutions, capable of ensuring the continuous flow of investment income into the fund and secure the payment of pensions.

If we are to start tackling this pension issue, we need to account firstly for the complexity associated with current financial markets. Secondly, we need to focus more attention to the responsibilities and accountability of financial intermediaries such as investment consultants advising the trustees and the investment fund managers who manage pension fund assets on their behalf.

With these two actions, we could make some steps towards the much needed change Prince Charles has called for.

Dr Fiona Whitehurst reflects on the importance of being ‘civic’

Newcastle University aspires to be a world-class civic university delivering benefits to individuals, organisations and to society as a whole, so it was a delight for the Business School to host Professor John Goddard OBE, Emeritus Professor of Regional Development Studies and former Deputy Vice Chancellor of Newcastle University to speak about his recently published book The University and the City  co-authored with Paul Vallance.

John is a leading proponent of the civic university concept, arguing in a 2009 NESTA Provocation that all publicly funded universities in the UK have a civic duty to engage with wider society on the local, national and global scales, and to do so in a manner which links the social to the economic spheres.

John revealed three tensioned themes emerging from his research – passive local physical, social and economic impacts of universities (campus footprint, student purchasing power, employment generation) vis a vis their active engagement in the development of the city; economic vis a vis more holistic views of engagement with civil society and the ‘external’ civic role of the university vis a vis ‘internal’ processes within the university and state higher education policies that shape these external relations.

John’s distinguishing attributes of a ‘civic university’ are:

  1. It is actively engaged with the wider world as well as the local community of the place in which it is located.  This engagement is achieved through dialogue and collaborations with individuals, institutions and groups locally, nationally and globally.
  2. It takes a holistic approach to engagement, seeing it as institution wide activity and not confined to specific individuals or teams.
  3. It has a strong sense of place.  While it may operate on a national and international scale, it recognises the extent to which is location helps to form its unique identity as an institution.
  4. It has a sense of purpose – an understanding of not just what it is good at, but what it is good for.
  5. It is willing to invest in order to have impact beyond the academy.  This includes releasing financial resources to support certain projects or activities, or to ‘unlock’ external sources of funding.
  6. It is transparent and accountable to its stakeholders and the wider public.
  7. It uses innovative methodologies such as social media and team building in its engagement activities with the world at large.

Plenty of food for thought, especially for a Business School. What does a ‘civic’ business school look like and how well does Newcastle University Business School fit that description?

Those are questions for a later post, but as I was pondering them I came across an article in the Financial Times (15 April 2013) by Della Bradshaw on German Business Schools. She notes that while Germany is the fourth-largest economy in the world, the country has no world-renowned business schools or top-ranked MBA programmes. In the article Robert Wardrop, research fellow in sociology and finance at the Judge Business School, University of Cambridge, ascribes this to the stakeholder value model of German business, which is incompatible with the methodologies that drive most Business School rankings. The MBA rankings tend to have an emphasis on salary maximisation, the traditional US individualist justification for undertaking an MBA. So, another question, does the third of John Goddard’s tensioned themes – the external role of a civic institution vis a vis internal processes and state policies have an added dimension for Business Schools?

Do Business School rankings take sufficient regard of an institution’s ‘civic’ role? In a time of unprecedented societal challenges globally I would like to suggest they should.

Dr Fiona Whitehurst, Director of Accreditation


Failure of strategy

The failure of strategy has led to an era of fiscal, institutional, and legitimacy crisis with major moral tensions.

Five years after the financial crisis hit, almost destroying the UK banking system, we continue to try to understand the factors that contributed to the disaster. This was a disaster that, as the world knows, overwhelmed the Royal Bank of Scotland and HBOS to the extent that UK taxpayers are still majority owners of these banks (HBOS having been taken over by Lloyds).

The UK public may well be puzzled as to how the disaster happened and who, apart from the publically scapegoated and dishonoured ‘Sir’ Fred Goodwin, is responsible for its occurrence. 

This month (April 2013) has seen the Parliamentary Commission on Banking Standards produce a report in a bid to continue to try and unravel what happened when private loss was made a public debt, and we slipped into a recession. 

The Commission has been set up to consider and report on:
• professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR rate-setting process
• lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and Government policy
The report on HBOS is refreshingly willing to name names, and allocate blame to the leaders of HBOS at the time of the crash, naming in particular Sir James Crosby, Andy Hornby, and Lord Stephenson.

The (formerly) highly paid senior bankers quoted in the report continue to claim that the crisis was a sort of unforeseeable natural disaster (‘tsunami’ is a term used on a number of occasions). This report and the written and oral testimony collected by The Commission provides invaluable evidence of individual, group, and institutional dysfunction.

In particular, the main issues that emerge from the report are (1) that HBOS was doomed irrespective of the financial crisis; (2) the bank’s ‘retail culture’ played a role in perverting the aims of the bank as a customer service organisation, (3) that the HBOS board lacked banking, rather than retail, experience, and was (4)  unwilling or unable to address issues of existential risk that were undermining the bank, even when brought to the board’s attention by a whistleblower.

The report raises questions for practising managers and for business school academics concerning how managers can manage large and complex organisations.

Hopefully this report will contribute to another lesson: how we teach future business leaders to sufficiently analyse corporate issues with responsibility and ethical practice. 

Dr Ron Kerr,  lecturer in Organisation Studies at Newcastle University Business School. 


Ideas matter, by Dr Tyrone Pitsis

Impact?  Increasingly, there is an expectation that academic research makes an impact; but what does this actually mean?

Even at a superficial level it is not easy to define because impact can refer to one object hitting another with force, and it can also refer to the effect that force has on the object.

As such, it denotes a violent action of immediate cause and effect.  So when scholarly research is said to make an impact it means that as researchers and teachers our work has made a strong effect on something or someone. 

Such beliefs about impact have traditionally been dominated by the idea of scientific impact, such as the impact a new drug has on illness, or material sciences having an impact on the design of civil, commercial and military aircraft and so on.

In my area, organization and management theory, impact is rarely that straight forward, and seldom is it immediate: in fact it can take decades to evolve. My colleague, Professor Chris Carter has a favourite quote from the British economist J.M.Keynes, which fits well here:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

In other words, ideas matter. Social science research is about knowledge, or what I prefer to call the materialization and seeding of ideas.  Lots of ideas flourish, both good ideas and bad ideas, and in social science we have plenty of good and bad ideas which are sustained. 

Fortunately, one thing I have learned is that good ideas generally outlive bad ones.  There are several articles by esteemed academics publishing in journals such as Academy of Management Review, Academy of Management Learning and Education, about the proliferation of bad ideas, and about management fads and the negative implications of bad ideas. 

An issue for researchers, particularly in business schools, is that the impact we make is rarely quick, and because what we deal with is knowledge, it often is difficult to demonstrate in practice.

 As governments move increasingly more towards ‘impact’ as a measure of quality, business schools will face increasing pressure to demonstrate that their research matters.

Impact however does not necessarily mean the research was any good, or well designed, it just means it was ‘taken-up’. The danger is that this leads to a clamour for easily implementable ‘quick fixes’ that do little to help the deep seated problems of organizations, and societies, or to advance scholarly knowledge.Instead, it leads to the emergence of sharp suited, ‘fast intellectuals’, whose stock in trade is to retail solutions for virtually every conceivable problem.

So now, organizations expect ‘fast’ value rather than ‘real’ value:  normalising fast value as the expectation, and normalising poor research practice and dissemination.My argument is that impact is a social process that forms and transforms with time.  As such for research to have impact it requires uptake and so the research must make sense to the community (or stakeholders), within which the research matters.

In this sense research should make a difference, should matter, and should make sense in a way that it provides insights and knowledge that are usable or translatable into practice.  However, there should be just as much onus on business and organizations to be curious, inquisitive and committed to well designed and conducted research as there is on academics who are expected to be ‘engaged’ with business. 

In this way, there is a greater challenge to ensure integrity in the research – that the research is warts and all without fear or favour. Research that tells people what they want to hear is seldom well designed research, and more importantly it’s useless – even though it can make an impact: but impact is not necessarily a good thing.  We need to celebrate good collaborative research, learn from it, develop skills and capabilities in doing it, and most of all really make sense of the term impact that is user centred.

 Tyrone Pitsis is Reader in Strategic Design and Co-Director of Strategy, Organisation and Society Group at Newcastle University Business School, and is Chair of Practice Theme Committee of the Academy of Management.


Who Can Help in the ‘Rehabilitation Revolution’?

James Timpson, Chief Executive, Timpson, and largest employer of ex-offenders in the UK

I’m really pleased that the political will is now firmly behind the rehabilitation of offenders, so that we as a country can try to help people in prison never to go back. Chris Grayling has started off on the right foot in my opinion. It’s obvious as I go around prisons recruiting people for our business that we need to be much better, more committed and fully open about the need to help people turn their lives around, and not assume they can always do it on their own.

I am working with the team at Newcastle University Business School to help train and inspire the North East prison bosses to become more entrepreneurial in their approach. Creating a culture in prisons that is about how you can fit into working life on release, and not about sitting on your bed all day, is one I know is right. I am determined to understand what can be done to reduce the justice system’s burden to the taxpayer.

In an open letter to the government (below), we called on government to act. Up to 80% of prisoners could work a full week towards their futures as citizens, yet only a fifth of them have been given this opportunity. Our academics held talks with community, policy and business leaders on this issue several weeks ago to gain a better understanding of the opportunities available to everyone involved.

To dispel fears about the possible negative outcomes of employing ex-offenders, education is just as influential to reforming the prison system as the results expected from private companies. Prison population is diverse and complex and full of untapped opportunity, but the question of how governors can unlock this potential will remain unknown unless they work well with companies.

It’s going to take a lot of experts from many areas to inform this ‘rehabilitation revolution’. Universities such as Newcastle and bodies like the Institute of Social Renewal are some of the best resources to advise prison governors towards a new way of thinking.

Prison governors need to become commercially driven to enable this cultural change. By starting a discussion on the type of ‘intelligent approach’, we can turn prisoner rehabilitation away from becoming a problem this country needs to solve and into something this country can use to its full advantage.

A commitment to allow prisoners to re-enter society, as opposed to just letting them rot, has real potential to improve the outcome of our justice system for everyone. So go for it Chris, go for it MoJ, go for it prison bosses, and as citizens we need to play our part in supporting this agenda.

Our open letter…

SIR – Working prisons provide offenders with the skills and support they need to turn away from a life of crime. Not enough of our prisoner population is in work, yet governors estimate as many as 80 per cent are in a position to work a full week.

The Government is pursuing an agenda to reform the prison system (report, October 9) in order to reduce re-offending rates. At the same time, the Government wants to bring outsourced operations of business back to Britain. If we allow prisoners to work, they can support their families and contribute to victims’ funds, relieving a burden to the taxpayer.

But there are commercial and practical challenges: prisons must be able to attract local employers and negotiate profitable contracts. And we, as a society, must overcome our intolerance of those who have committed crimes and realise that work is essential to their rehabilitation.

Professor James Timpson OBE
Visiting Goldman Professor of Innovation and Enterprise at Newcastle University Business School

To see the article on the Huffington Post website please click here >


Newcastle University Business School appoints new director

Professor John Wilson to oversee next phase of institutional development

Newcastle University Business School has announced the appointment of its new Director, Professor John Wilson. Joining from the University of Liverpool, where he was Professor of Strategy at the Management School, Professor Wilson will officially take up the post at the Business School from 12 November.

With strong academic credentials and senior management experience within higher education, as well as an impressive track record in securing significant external research funding, Professor Wilson will now lead the Business School from its new £50m headquarters in the heart of Newcastle, home to 2800 students. Newcastle University Business School’s research expertise is helping to influence current business policy and practice and its focus on teaching core aspects of management has helped it achieve global accreditation. 

At the University of Liverpool, Professor Wilson was responsible for teaching activities across the undergraduate and postgraduate curricula as Director of Programmes at the Management School, where he oversaw a trebling in postgraduate student numbers from 250 to over 700, in just three years. Previous appointments have included Director of Research at University of Central Lancashire, where he was instrumental in the last major national Research Assessment Exercise.

Over the past 20 years, Professor Wilson has submitted research papers in the US, Asia, Europe and Latin America, and is an active contributor to conferences, workshops, and seminars in his specialist subject areas of management history, international business history, and strategy. The Co-operative Group sponsors his current major project, and he is also involved in international projects looking at inter-corporate networks, bank-industry links, and technology transfer.

Professor Wilson currently edits a prominent four-star academic journal, ‘Business History’, and possesses a balanced portfolio of publications across books – as author, editor and contributor – and leading academic journals.

Commenting on his appointment, Professor Wilson said:

“I am enormously enthused by both the people and facilities at Newcastle University Business School. There is no doubt my predecessors, and the current Executive Team, have laid solid foundations on which we can build an internationally renowned institution.

“I’m really looking forward to collaborating with my Newcastle colleagues in research terms, as this is an essential component in the further development of our reputation for world-class status. From a managerial perspective, I’m looking forward to applying my experience and knowledge around research, teaching, accreditation, and strategic development, in an exciting, ambitious environment. 

“We have an extremely rich pool of talent at the Business School, at both academic and professional support levels. Working as a team, I have no doubt that we can continue to create something very special, and take the Business School’s profile to the next stage, internationally.”

Professor Chris Brink, Vice-Chancellor, Newcastle University added: “Professor Wilson’s appointment will help to consolidate the progress that we have made at the Business School in recent years which culminated in the opening of our brand new campus last year.

“The Business School has attracted a wide and talented pool of staff and students from around the world and has established an increasingly high profile in key global markets such as India, China and the US, due to a rise in student numbers and steady growth in both research output and industry collaboration.
“I look forward to welcoming Professor Wilson to Newcastle.”

Professor John Leopold has been Acting Director since Professor Ian Clarke stepped down earlier this year, and will return to his Deputy Director role in November.


What a difference a year makes

Dr Tyrone Pitsis discusses last year’s riots:

This time last year the UK witnessed unprecedented public rioting. One year on, and in the midst of Olympic jubilation, Dr Tyrone Pitsis, Newcastle University Business School, looks at the reasons people revolt and how collaboration and hope promote social cohesion.

As the UK remembers the rioting that tore through towns and cities a year ago, the Government has released a report exploring the reasons why they happened. Unsurprisingly, the causes were found to be complex and deep-seated: problems that go back generations.

My own research work into social economics addresses some of the issues to which the Government’s experts attribute last year’s riots. Why have so many of the young generation lost hope? Why is social mobility so difficult in the UK? What can we do to stop history repeating itself in the form of future generations with similar problems? There will be no easy answers to these problems.

While Newcastle and the North East were happily not affected by last year’s riots, we still see some of the social issues that precipitated them. First, I want to cut through the hype. The riots were not the evidence of the steady decline of society. It is much more complex than that.  Some may have rioted because they feel alienated from society.  For others it was opportunism, for others still it was about being in ‘the flow’ of things: or what is referred to as being in the moment – caught up in a sense of something that would be ‘fun’ or daring.  The remarkable thing about the riots is that most people, and especially young people, did not partake.  So, we tend to focus on what people did, rather than what they did not do.

Even so, the riots were real, and they do point to the fact that something needs to be done in the UK.  My opinion is simple: once people lose hope anything goes, and hope transforms into hopelessness.  This is destructive and self-defeating – it offers answers that lie in taking short cuts, in crime, in just taking what you want. We cannot separate human action from the social context within which it occurs.  All human action is a dynamic political process.

I am interested in the idea of hope, and because of that my research concentrates on the idea of designing society: the concept that we ourselves can design how society’s institutions, its policies, regulations, social norms and its infrastructure and even buildings are integral to the kind of community and society we live in. 

Universal design is a simple principle, originating in Japan, which is underpinned by the idea that when designing products and services they should be designed to be inclusive rather than exclusive.  This is a straightforward idea and applies to societies and communities.  If you design cities with all activities occurring in one space, you cannot complain that other parts of the city and country suffer. For example, a risk to the North East is that we depend heavily on the public sector for employment; similarly London, having been “designed” as a financial centre, has a strong reliance on that one sector.

The UK, compared to other parts of the industrialised world has a poor level of social mobility – which put simply means the opportunities for people to make better prospects for themselves. I believe this is because the whole social and economic infrastructure has not been best designed to offer opportunities for growth at a personal, interpersonal, community and national level. Social mobility is about access, democracy, and a vibrant and sustainable economy and society.

While there may be no simple answer to such complex issues, I am however convinced that the idea of design thinking is a process well worth investing in at all levels of government and industry. There is a critical factor here called “inter-organisational collaboration” – that is, collaboration between governments, industries and different sectors to design the future of the UK, its cities and its communities, and more importantly its place in a global economy that is undergoing ambiguous and uncertain transformation.

I’ve long been interested in how collaboration works in mega-projects, for example the delivery of the Olympics. Those involved would attest to the fact that different parts of the system are so fragmented that it’s a real challenge to get different organisations, departments and institutions to talk to each other, let alone work in unison.

My research over the years has shown that collaboration is a creative, dynamic process and requires very different skills and capabilities from those which we currently demand of organisations and society.

But there is real hope here – one only need look at the Olympics to see an example of how collaboration can really engineer success. Just one year on from the riots, the energy and optimism from London 2012 can be harnessed to bring people together to make real change. There is a general mood of positivity in the air, which can be turned into something tangible.

Collaborative design and relationships, however, are only part of the answer when it comes to designing society.  The big questions include what kind of economy are we designing and how do things work? How do the financial systems work, and how are they regulated?  How do universities and schools work? What will the infrastructure look like?

To my mind there are two key areas that the UK must attend to: technological innovation (from medical to information technologies), and cultural innovation (such as the arts and cultural diversity). I believe that if you want a smart society, you have to encourage a culture of doing smart things.
Problems of inequality, lack of opportunity and how communities can adapt in times of rapid social and economic change, are exactly the sort of issues that prompted Newcastle University to launch the Institute for Social Renewal this year. As a world-class civic university, we have focused a large part of our research efforts into tackling profound global challenges – known as the societal challenge themes, they include ageing and health, sustainability and social renewal. We take very seriously our duty to make a difference to the world around us; not only to be a leader in thinking, but also in action.

The new Institute, led by by Professor Mark Shucksmith OBE, is intended to be a dedicated centre for research into some of the biggest problems faced by individuals and communities today. The Institute brings together the expertise of academics from across the University, to tackle the “big questions” faced by society.

For further information on Newcastle Institute for Social Renewal, visit

For further information on Dr Pitsis and his work, visit