Vocabularies of Motive and Temporal Perspectives: Examples of Pension Fund Engagement and Disengagement
| Published date | 01 July 2017 |
| DOI | http://doi.org/10.1111/1467-8551.12225 |
| Date | 01 July 2017 |
British Journal of Management, Vol. 28, 502–518 (2017)
DOI: 10.1111/1467-8551.12225
Vocabularies of Motive and Temporal
Perspectives: Examples of Pension Fund
Engagement and Disengagement
Anna Tilba and John F. Wilson1
Newcastle University Business School, 5 Barrack Road, Newcastle upon Tyne NE1 4SE, and 1Faculty of
Business and Law, Northumbria University Newcastle,Newcastle-upon-Tyne NE1 8ST, UK
Corresponding author email: Anna.Tilba@ncl.ac.uk
Prior research on institutional investors’ role in corporate governance draws a distinc-
tion between engaged and disengaged pension funds. The aim of this study was to shed
more light on how pension fund practitioners talk about engagement and disengagement.
Using insights from 35 in-depth, semi-structured interviews and round-table discussions
with pension fund trustees, executives, investment ocers and financial intermediaries,
we identify dierent types of vocabularies and temporal perspectivesused to account for
dierent stances towardsengagement. We highlight a tension between a seemingly causal
relationship between accounts and future behaviour and argue that these ‘accounts’,
‘vocabularies’ and ‘uses of the past’ in themselves need to be treated as an object of study
because they may represent not simply the individual motivations but rather the expres-
sions of extant norms in the broader social context of financial markets. An important
policy implication is that perceived realities of investmentare unlikely to cause a change
in pension fund behaviour because participants seem to decouple their view of the world
from their impact on the world.
Introduction
There is a general academic and policy concern
in the UK about the way the financial system
is operating; specifically, that investor disengage-
ment and their short-term goals are damaging
the economic health of the country (Kay Review,
2012; Plender, 2011). There is now a formal agree-
ment among policymakers that more accountabil-
ity within the investment chain and more eec-
tive investor engagementare needed to remedy the
situation (Kay Review, 2012; Stewardship Code,
2010). Pension funds in particular have been re-
garded for over a decade as best suited to act
The authors wish to thank Professor Marc Goergen
(Associate Editor) and the referees for their insight-
ful comments and suggestions. The authors also ac-
knowledge the helpful comments from Professor Andrea
Whittle, ProfessorRoy Suddaby and Dr Con Keating.
as long term and have engaged investors because
they tend to havelong-ter m and predictable invest-
ment horizons and therefore can provide ‘patient
capital’ (Davis, Lukomnik and Pitt-Watson, 2006;
Haldane, 2010; Hawley and Williams, 2000; Kay
Review, 2012; Martin, Casson and Nisar, 2007;
Myners Report, 2001; Ryan and Schneider, 2002;
Stewardship Code,2010). Yet, the evidence of pen-
sion fund engagement is mixed.
Our research aims to shed more light on what
characterizes the distinction between engaged and
disengaged pension funds, more specifically on
how pension fund practitioners talk about engage-
ment and disengagement over time. We start with a
review of the literature, which highlights the para-
doxical nature of institutional ownership without
a commitment and mixed evidence on pension
fund engagement vis-`
a-vis portfolio companies.
To help explain why such variations in behaviour
may exist, we frame our study in the construct of
© 2017 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
Vocabularies of Motive and Temporal Perspectives 503
vocabularies of motive, sense-making and orga-
nizational enactment (Mills, 1940; Weick, 1969),
combining this with the notion of temporality
(Bluedorn and Standifer, 2006; Slawinski and
Bansal, 2012). This novel analytical lens informs
our methodology and data analysis,which we out-
line in our research design. By using the examples
of pension fund engagement and disengagement,
we reveal the existence of dierent accounts and
vocabularies of motivewithin pension fund invest-
ment practices. These vocabularies of motive are
durable and also accompanied by distinctly dier-
ent temporal perspectives. We term these as ‘en-
gaged’ and ‘disengaged’ vocabularies. Disengaged
vocabulary included common internal and exter-
nal accounts which were referred to as significant
constraints to engagement. In contrast, engaged
vocabulary included a range of external and in-
ternal accounts described as enablers of engage-
ment. We also found that pension fund practition-
ers who used a disengaged vocabulary had a more
negative perception of the present in comparison
to the past, which led them to describe the future
as more uncertain and short term. Engaged vo-
cabulary consisted of a narrative of positive grad-
ual changes in the industry over time, which was
associated with a longer-term and sustainable fu-
ture. In so doing, we present rich and novel empir-
ical examples of distinct vocabularies and propose
that they represent an important linchpin for un-
derstanding how vocabularies shape institutional
behaviour. Wehighlight the need to develop a more
coherent and common understanding of how vo-
cabularies and temporal perspectiveswork, partic-
ularly as our findings highlight a tension between
a seeming relationship between vocabularies and
accounts and future pension fund behaviour vis-`
a-
vis investee corporations. We conclude by consid-
ering the significance of our findings with respect
to academic and current policy debates, oering
some implications for further research.
Ownership without commitment: mixed
evidence of pension fund engagement
Since Berle and Means (1932) examined the
implications of the separation of ownership and
control, the monitoring and disciplining role of
institutional investors has been considered to be
an important governance mechanism (Jensen and
Meckling, 1976). In his seminal work, Hirschman
(1970) identified the investor/company relation-
ship within the ‘exit’ or ‘voice’ framework, where
investors either sell the shares (‘exit’) if they are
dissatisfied or express concerns to management
though ‘voice’ or engagement. However, the
empirical evidence investigating this relationship
is decidedly mixed (Bainbridge, 2003; Dalton
et al., 2007; Tilba, 2011). Most recent academic
reviews of the current stateof shareholder activism
literature suggest that the research on shareholder
engagement (both financial and social) oers
conflicting perspectives on this topic (Goranova
and Ryan, 2014; McNulty and Nordberg, 2016).
Paradoxically, Davis (2008) and Jackson (2008)
observe that, although institutional investorsseem
to be increasing in both size and the concentration
of their stakes, this concentratedownership is gen-
erally liquid and without commitment, focusing
on generating short-term investment returns. This
is reflected in the trend towards increased stock
turnover and shorter average stock-holding peri-
ods (Ownership Commission, 2012; Tomorrow’s
Owners, 2008). For example, in the UK, institu-
tional investors’ portfolio turnover reached 56%
(Jackson, 2008), while the average duration of eq-
uity holding has fallen from five years in the 1960s
to just over seven months in 2009 (Haldane, 2010).
Pension funds, it is argued, are best suited to
act as long-term and engaged investors because
they tend to havelong-ter m and predictable invest-
ment horizons (Davis, Lukomnik and Pitt-Watson,
2006; Hawley and Williams, 2000; Kay Review,
2012; Martin, Casson and Nisar, 2007; Ryan and
Schneider, 2002; Stewardship Code, 2010). Yet,
there are only a few UK (mostly quantitative)
studies that examine pension funds in relation to
corporate governance. The evidence is also con-
flicting. On the one hand, most prominent (US)
studies on shareholder activism have centred
around California Public Employees Retirement
System’s (CalPERS’) activism on target firm gov-
ernance structure, shareholder wealth and per-
formance (Barber, 2007; Choi and Fisch, 2008;
Hebb, 2006; Smith, 1996). In the UK, Clark and
Hebb (2004) have observed that pension funds use
their influence to increase managerial accountabil-
ity and corporate transparency in order to raise
standards of corporate behaviour. A survey of
more than 250 pension funds in 15 European coun-
tries by Siev¨
anen, Rita and Scholtens (2013) also
demonstrates that large and small pension funds
are active in responsible investment.
© 2017 British Academy of Management.
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