by Mark Freeman, Professor of Finance and the Associate Dean (Partnerships, Engagement, and International) for the Faculty of Social Sciences.
I sometimes find myself questioning the prevailing wisdom within universities on how we might best drive social change.
Within many of our departments, there is a deep-seated belief that the most noble and effective way to improve society is to work alongside the state and the third sectors. These are seen as the primary engines of progress, motivated by public service and altruism. Significantly less effort is afforded to collaborating with for-profit firms. To many in academia, the private sector is at best a separate world and, at worst, an adversary to the delivery of positive social change.
A major national 2024 study examined “the stories, successes, and cumulative effects on people, the economy, policy, and society of the impact of research” across the Social Sciences and Arts & Humanities. The findings were stark. The contribution of our work on “Business, Economics and Management” makes up less than 9% of our overall total academic impact. To put that in perspective, our work’s contribution to “Archaeology, Exhibits & Galleries” is almost twice as great. It is curious that we dedicate double the energy to driving change in museums and galleries than we do to the commercial engines that dictate the daily lives of millions.
There are many structural reasons why universities find it so challenging to undertake research with businesses. First, ours is an open world of archived data and peer-reviewed publications where the goal is transparency. Conversely, companies operate in a world of commercial sensitivity and intellectual property.
Second, academics believe in being “constructively critical”. Firms, by contrast, have reputations and share prices to protect; they are understandably hesitant to invite a researcher who might conclude publicly that their business model is socially detrimental.
There is also the matter of scale and resources. While large, multinational businesses can fund their own sophisticated research, smaller enterprises frequently lack the financial resources or the headroom in terms of time to navigate the complexities of working alongside a university.
Furthermore, our definitions of “truth” differ. Because we require high levels of statistical significance and peer-reviewed “proof”, the timescales to which we work are often measured in years. This rarely sits easily alongside the ticking clock of the private sector. We frequently conclude that the evidence is “grey” and requires further study, while managers are forced by the market to make binary “yes or no” decisions.
Perhaps most significantly, many people working in the Higher Education sector have no career experience of commercial delivery. This makes it harder for researchers to understand the nature of the problems that keep business directors awake at night. We struggle to compete for attention against glossy management consulting firms who, while perhaps less rigorous, speak the language of the boardroom with greater fluency.
For many of these reasons, most of my own work, like that of my colleagues, is conducted with regulators and government departments. In those spaces, the organisational cultures are aligned, and the rules of engagement are familiar.
Even within the limited amount of impactful research that Social Sciences Faculties successfully undertake alongside the private sector, much of it avoids the core commercial imperative of business. We focus on the “softer” elements; Environmental, Social & Governance (ESG) and Diversity, Equity & Inclusion (DEI).
There are many excellent academics who work with for-profit businesses with the “bottom line” as the focus of attention. For example, Professor Alexander McNeil’s internationally leading work on enterprise risk models for banking and insurance, encompassing models for market and credit risks and for valuing and hedging insurance liabilities, has demonstrably positively impacted the performance of financial services firms. Yet such commercial work remains in a small, often isolated minority.
I believe the root of this failure to engage is both philosophical and political. Many academics fail to engage successfully with business because they fundamentally see profit and positive social change as conflicting, rather than complementary, objectives.
My own perspective was forged in a different world to most of those around me. Long ago, I was a stockbroker in a now near-extinct version of the City of London. There, I learned the brutal, effective logic of capital: that performance earns reward and that money flows toward the ‘deserving’ firm. It taught me that profit is one of the most potent, if underutilised, levers for social transformation we possess.
We must also look at the sheer scale of the opportunity we are missing. Business dominates the economy in a way that the public and third sectors simply do not. In 2024, almost 24 million people in the UK worked in the private sector, compared to just under 6 million in national & local government combined, and only 2 million in the non-profit sector.
As a university sector, we are largely failing to interact with the vast majority of people in their place of work. Without successfully harnessing such a large resource base, it is difficult to see how we can optimally drive the societal shifts we claim to desire.
There is little point in refusing to collaborate with businesses until the world is how we would like it to be. The Companies Act 2006 requires directors to put shareholder interests to the fore. In UK law, this is interpreted as “long-term value enhancement”. ESG and DEI considerations can be powerful drivers of long-term value; the “grow the pie” approach. However, they cannot, by law, be alternative primary objectives that replace sustained profit. If we approach businesses asking them to sacrifice their primary legal duty, we will be ignored.
Beyond the legal setting, we should accept that profit is a social good in its own right. For those of us invested in the University Superannuation Scheme (USS) Growth Fund for our future pensions, almost 60% is placed in traded equities. With memories of USS pension deficits so fresh in our minds, and the implications those deficits had on our current contributions and future benefits, we need to consider the impact of low corporate profitability on retirement poverty.
Furthermore, the technological advancement that has changed our lives has been heavily generated by those seeking profit. The iPhone has driven monumental social change, connecting the global poor to markets and information, even if that change hasn’t always been unambiguously “good” in every psychological or social metric.
In a famous 1970 article in the New York Times, the Nobel Laureate Milton Friedman argued that “The Social Responsibility of Business Is to Increase Its Profits”. This remains a contentious point; the Chicago Booth Review recently published a series of papers showing that advocates on both sides of this debate are still as passionate as ever. However, a university aiming to be a “Catalyst for Social Change” cannot completely discard the idea that profit drives societal benefits. It would just ensure we will never fully successfully engage with the majority of the workforce.
If we can come to terms with the idea that we need to help firms with the bottom line, then we can start to address the cultural issues that stand in our way. Meaningful collaboration requires us to step into the commercial reality where most of society actually lives. Only then can we move from being observers of social change to being its true driver.
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Photo credit Alesia Kazantceva
The views, thoughts, and opinions expressed in this blog are solely those of the author and do not necessarily reflect the policies or views of the University of York