Ours is an age of values inflation. Every organisation of any size now has a statement of values, the hyperbole of which grows in proportion to the crises confronted. It is not enough now to have integrity. You need, as does the investment bank Investec, to promise “cast-iron integrity”. And compliance with regulation is insufficient: your quality now has to exceed excellence.
A decade ago, City values were rampantly in the ascendant in British society. The City of London stood for “cool Britannia’s” greatest success: financial services. And that City, physically comprising London’s Square Mile and the annex of Canary Wharf, dominated the world’s perception of broader British business life.
The City’s annually rotating lord mayor – also ex officio chancellor of City University London – was the official advocate for British finance services, wherever located. Mostly these lord mayors, in hundreds of ceremonial addresses each year, safely followed the sentiments of fellow City grandees, often borrowing the euphemisms of City corporate social responsibility statements.
According to the most celebrated historian of the City, David Kynaston, it was, however, the governor of the Bank of England who set the City’s tone, and banged heads together behind the scenes as necessary. A decade ago, the Bank’s message seemed to be light-touch regulation and even lighter-touch accountability. Until the wheels started to fall off the City’s glittering coach in 2007-08.
Talking about “City values” is, of course, as nebulous as talking about “academic values”. So, let’s look at some attempts to capture their approximate ambits. Paul Curran, vice-chancellor of City University London, recently suggested in a Times Higher Education article positive “corporate” values of “clarity, efficiency, speed of responsibility and ability to effect change” (“Know the score”, Features, 5 March).
Writing in the RSA Journal last year, Andreas Schleicher, from the Directorate of Education and Skills at the Organisation for Economic Cooperation and Development, came up with a similar but longer list of the values of corporate capitalism: “growth, individualism, competition, utility, efficiency, choice, consumption, adaptability and, above all, speed”.
Meanwhile the “Core Values of Higher Education Governance”, listed at the start of the latest Committee of University Chairs’ Higher Education Code of Governance, are claimed to be: autonomy, academic freedom, protecting the collective student interest, transparency of information, contractual accountability, equality of opportunity and diversity, and access for all “who are able to benefit from [higher education]”.
Looking further back, Curran recognises the origins of the collegial university in “a democratic, self-governing community of self-motivated and -directed, autonomous scholars”. The University of Cambridge has recently boiled its core academic values right down to just two: freedom of thought and expression; and freedom from discrimination.
In 2011, Kynaston identified a deep-seated problem with “new city values, or rather lack of them”. In his view, despite the global meltdown, there was a continuing arrogance about the “masters of the universe” mindset with its “rigid efficient-market assumptions about human behaviour”.
By 2015, now with $235 billion (£150 billion) in misconduct fines on global banks and still much more to come, it is apparent that the gap between values and actual practice remains vast. Indeed, a majority of these financial crimes or misdemeanours have occurred since the meltdown of 2007-08. Reform is patchy, and less certain now that a pure-Conservative government, more beholden to the City, is in place.
The banks themselves have just funded an “independent” Banking Standards Board, chaired by Dame Colette Bowe, dedicated to changing banking culture and raising conduct standards. But like the City Values Forum, established in 2011 by an enthusiastic (non-banker) lord mayor, Sir Michael Bear, its success may be just as slow and limited.
“This is for us very early days”, Bowe said on 18 June. Her board now looks to other sectors that have lost public trust to help it in “engineering serious change”.
Then there is Mark Carney. Two years into his governorship at the Bank of England, the Canadian is chafing at the bit. On 10 June, sensing that Chancellor George Osborne desperately wants to move on from the era of “banker bashing”, Carney pulled no punches when speaking before the Lord Mayor’s Banquet for Bankers and Merchants at the Mansion House.
Without any of the light banter that is traditional at such festivities, the governor launched into a description of the Great Fire of London, and his audience suspected that another immolation was on the way.
“Real markets are professional and open, not informal and clubby. Participants in real markets compete on merit rather than collude online,” he said, throwing in mention of “codes of conduct that too few read and too many ignored”.
Then, referring specifically to FICC (fixed income, currency and commodities) markets, Carney outlined five areas of deficiency: market structures (“vulnerable to conflicts of interest, collusion, and thin markets”), standards of practice (“poorly understood, often ignored and always lacked teeth”), internal governance (not maintaining the “interests of firms…over those of close-knit trading staff”), individual incentives (skewed to “short-term returns”), and personal accountability (amid “a culture of impunity”).
Having got that off his chest, the governor said that for which the City will never forgive him. For eight years, we have heard how most bankers are upright, ethical people, let down by “a few bad apples”.
If Kynaston is right, and the governor of the Bank of England does set the tone of the City, then Carney’s immediate predecessors failed abysmally: “Unethical behaviour went unchecked, proliferated and eventually became the norm,” Carney continued. “Too many participants neither felt responsible for the system nor recognised the full impact of their actions. For too many, the City stopped at its gates, though its influence extended far beyond.”
In effect, the barrel of apples was rotten. This was not even unfortunate group-think, but collusive systems-think, whether online or (even worse) off.
All agree, eight years into this behavioural disaster, that reform is not easy; real values and trust in them are proving hard to re-establish. In an article for The Conversation website earlier this year, one Australian commentator, Pat McConnell, honorary fellow in the Applied Finance Centre at Macquarie University, pointed out that if individuals working in banks can switch on and switch off honesty, then reform can only start with the individual.
This is also where Carney started in his Mansion House speech: “Individuals must be held to account.” Individuals must know that they can be fired, imprisoned, and their history subsequently “known to those who consider hiring them”. Only on a basis of individual accountability can reform of firms, effective coverage by regulators, or global standards for global markets be essayed.
Carney stated that unethical City practices extended “far beyond” the City’s confines. Perhaps then even universities need to ask: how far? and, since when?
In 2003, just before he became director general of the CBI, (now Sir) Richard Lambert authored a seminal report into business-university collaboration. A decade later, Sir Tim Wilson, former vice-chancellor of the University of Hertfordshire, looked back on it as a real “game-changer”: “university-business collaboration [is] in a completely different place from a decade ago”, he wrote in a 2013 blog for the Royal Society. And most in universities today would agree with Wilson.
Unlike many university reports, Lambert’s was practical. It proposed model agreements for university-business research, now widely adopted, and, as Wilson explained, introduced “a menu for action to generate cultural change”.
When I spoke to him recently, Lambert said that his report was fortunate to have been “riding the wave” of those times, tackling “a long-term lack of interest of UK companies in research and development”.
What Wilson does not talk about, however, is the Lambert report’s inclusion of a draft code of governance for universities. This has been more problematic in implementation. While commending such universities as Sheffield, Manchester and Warwick for their active response to effectiveness reviews, the Lambert report put Oxford and Cambridge on three years’ notice for more governance reform. This clearly influenced Oxford, from 2004 under vice-chancellor John Hood, to go down its rocky road of reform.
In developing this draft code of governance, Lambert looked to the City for models. He lists three particular sources, all dating from 2003: a general Australian blueprint for change, the Department of Education, Science and Training’s Our Universities: Backing Australia’s Future; Derek Higgs’ Review of the Role and Effectiveness of Non-Executive Directors, intended for companies listed on the London Stock Exchange; and the Financial Reporting Council’s Combined Code on Corporate Governance, intended for FTSE 350 companies.
While Lambert’s draft code did influence some aspects of governance documents subsequently issued by the Committee of University Chairs, it was most enthusiastically adopted in a few individual universities, led by the City of London’s own university: City University London. City, with the strapline “for business and the professions”, had already been attempting to develop a distinctive academic culture in keeping with that strapline. It recognised the “crystallising” significance of the Lambert report, thereby adding confidence to its reform agenda.
Writing in 2006 for a collection of essays titled European Universities in Transition (2008), City University’s secretary at the time, Ian Creagh, and Cass Business School academic Richard Verrall looked back on City’s “systemic corporate governance reform” thus far, sketching the university’s attempts to develop “a highly pragmatic, competitive and often opportunistic approach to its strategic development”, within appropriate university bounds.
The university’s initiative accorded with a growing policy view that, in Creagh and Verrall’s words, “commercial sector corporate governance reform – transparency, rebalancing stakeholder and executive power, effective reporting and accountability – are as relevant to health services, schools, the charitable sector and universities as they are to private corporations”.
Now, it is reasonable to look back and question in how many of these areas the adoption of “commercial sector corporate governance” has been advantageous. Obviously, Carney thinks that such governance has been a disaster in financial services themselves, through being “incapable of asserting the interests of firms”. But it appears hardly to have been the wanted panacea in health services or schools, and has had a very mixed outcome in the charitable sector. Curiously, it may have been most influential in our universities, through the sector’s dutiful implementation of (generally) well-adapted governance mandates from the Higher Education Funding Council for England.
Curran has this to say. Under the subtitle “The marriage of two mindsets: finding your way around impediments”, his part of the THE feature observed that different universities need different models: the “ancient universities” tend to be more collegial; and the newer ones, more corporate. I guess this means that being located in the middle, in a “median university” such as City, is hardest.
Not surprisingly, then, Curran personally seeks for “operational balance” with a useful rule of thumb: if you appear “rather collegial” to your governors and professional staff, but “rather corporate” to academic colleagues, then as vice-chancellor you may be getting it about right. But it is, Curran says, “a continuing challenge”.
As McConnell and Carney point out, the benefit or damage brought about by the adoption of City values is rooted in the behaviour and adaptability of individuals, prompting questions such as these:
- Can individual governors, or university staff with business (City) backgrounds, adapt to the different purposes and values of academic institutions? Lambert, in a recent interview, thinks they can: “Intelligent people can see [the difference], and adapt.” But the recent Fair and Effective Markets Review suggests that many, even within financial services themselves, do not so readily adapt to change.
- Can you spot the really independent from the dependent university governor? A major issue of concern for commercial firms is covert dependency within boards: who is actually in whose pocket? Such dependency easily exists on university boards also because of the same informal self-propagation of the non-executive membership. While a growing suite of online tools (for instance, Bloomberg Business) can effectively track commercial board interrelationships, these tracks do not yet extend far into the charity world or the world of public appointments.
- Do you really have full disclosure of the interests of governors and senior executives? Including both their charitable interests and their commercial interests? University websites are often curiously opaque about the latter, which may be the more important for conflicts of interest.
Governance is, however, just an opener to the question of the influence of City values on the academy. Differences in values can challenge educational aims (for instance, “benefit of all” versus “winner take all”), research purposes (fundamental versus instrumental), philanthropy (support versus status), and even the purpose of services such as accommodation (cost-recovery versus maximised investor profit).
Taking the prize, however, for persistent confusion of values is the practice in most universities of awarding honorary degrees. Because of supposed success in realising City, Church, press, entertainment or even political values, or just through holding a civic position, scores of “celebrities” are invited to accept an unearned version of the highest denomination of the university’s academic currency, the doctorate.
With increasing frequency this ingratiating practice backfires, bringing the university and its credibility into question. With hindsight, the most tragic double bill in UK honorary degree history was the University of St Andrews’ morning ceremony of 23 June 2004, where Fred Goodwin, then chief executive of the Royal Bank of Scotland, and Cardinal Keith O’Brien, then head of the Roman Catholic Church in Scotland, both received honorary doctorates from the nation’s oldest university. For very different reasons, both languish now in disgrace. Surely universities should now stick to awarding quality-assured, earned degrees.
It is noteworthy that the 2003 Lambert report did not significantly consider what business could learn from the low-authority way most universities conduct their operations. That counter-direction was not conceivable at the time. But it is now, as doctors, teachers and scientists continue to command the high community trust that business leaders, bankers, journalists and politicians so conspicuously lack.
Alfred Morris, a hard-boiled accountant-turned-vice-chancellor, entered his university administrative life expecting that “over time universities would increasingly come to resemble businesses”. He later concluded that businesses needed to be more like universities, because of their success in harnessing “the creative and intellectual talent of the workforce by adopting participative management styles” (“Private providers: Maligned and misunderstood?”, 12 December 2014).
Schleicher goes further, seeing the planet and its increasingly fissured communities as desperately needing cooperation and patience: “The values that have allowed western capitalism to thrive now threaten its future,” his RSA Journal article concludes. To avoid systemic collapse, the sorely needed values now are “sustainability, community, cooperation, generosity, recollection, reflection, deliberation and, above all, patience”, he argues. This is a remarkable listing of the “slow” virtues once recognised in public universities.
But would anyone now be so daring as to re-embrace such radical, such anti-City values?
Malcolm Gillies retired in 2014. He was vice-chancellor of City University London (2007-09) and then of London Metropolitan University (to 2014). As reported at the time, he left City University because of “differing views on matters of governance” with the university’s council.