THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON PROFITABILITY IN NIGERIA BANKING INDUSTRY
ABSTRACT
This research work seeks to examine the impact of corporate social responsibility on bank performance on the commercial banks in Nigeria. Time series data from 2004 to 2013 were computed from the financial statements of the samples studied. The period was assumed long enough to account for corporate social responsibility on five commercial banks in Nigeria. Annual reports from the secondary source of data collection where the CSR expenditure and return on assets (ROA) for the period of 2004-2013was used for the computational experiment. The data collected for this study were analyzed using correlation and regression analysis. The hypothesis formulated was tested. The study concluded that there is positive relationship between banks CSR activities and bank performance. The study reveals that corporate social responsibility has a great impact on the society by adding to the infrastructures and development of the society and concludes that a company has to give back to the society in which it operates and also provide infrastructural facilities to the society as a way of giving back and developing the society. It was recommended that corporate social responsibilities should be seen by the firm as social obligations business concerns owe their shareholders, the local (host) community, general public, customers, employees and the government in the course of operating their legitimate businesses, such that CSR should be included in the law and enforced on the firms accordingly and that Government should fix a minimum percentage of profit corporate firm should expend on corporate social responsibility activities.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Corporate Social Responsibility (CSR) as a concept entails the practice whereby corporate entities voluntarily integrate both social and environment upliftment in their business philosophy and operations. A business enterprise is primarily established to create value by producing goods and services which society demands. The notion of Corporate Society Responsibility (CSR) is one of ethical and moral issues surrounding corporate decision making and behaviour, thus weather a company should undertake cer¬tain activities or refrain from doing so because they are beneficial or harmful to society is a central question. Social issues deserve moral consideration of their own and should lead managers to consider the social impacts of corporate activities in decision making regardless of any stake¬holders’ pressures. However, some argument that the contri¬bution of concepts such as Corporate Society Responsibility (CSR) is just a reminder that the search for profit should be constrained by social considerations (Manuel and Lúcia, 2007) and increasingly Corporate Society Responsibility (CSR) is analysed as a source of competitive ad¬vantage and not as an end in itself (Bran¬co and Rodrigues, 2006).
Today, managers of Nigerian banks have found a need that the environment in which they operate should be provided for because their intermediate and macro environments have a direct impact on the attainment of the corporate goals, objectives and mission statement. The purpose of all profit-making organizations, and even the non-profit making organizations, is to maximize profit and in turn minimize cost, through optimal utilization of available resources to achieve the best results they are capable of. Profitability is an important factor to all banks, because it is one of the major purpose for which the banks are established.
Corporate Society Responsibility (CSR) involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process, thus a means of analyzing the inter-dependent relationships that exist between businesses the economic systems and the communities within which they are operating. Corporate Society Responsibility (CSR) is a means of discussing the extent of obligations a business has to its immediate society; a way of proposing policy ideas on how those obligations can be met; as well as a tool by which the benefits to a business for meeting those obligations can be identified (Corporate Society Responsibility Guide). Corporate Society Responsibility (CSR) is also referred to as ‘corporate’ or ‘business responsibility’, ‘corporate’ or ‘business citizenship’, ‘community relations’, ‘social responsibility’.
The Nigerian banks seek to conduct Corporate Society Responsibility (CSR) so that they meet there financial, social and environmental responsibilities in an aligned way, their financial, social and environment responsibilities in an aligned way. At its core, it is simply about having a set of values and behaviours that underpin its everyday activities, its transparency, its desire for fair dealings, its treatment of people, its attitudes towards and treatment of its customers and its links into the Community. As a result, the environmental aspect of Corporate Society Responsibility (CSR) is seen as the duty to cover the environmental implications of the company’s operations, products and facilities, eliminate waste and emissions, maximize the efficiency and productivity of its resources, reward for externalities and minimize unethical practices that might adversely affect the enjoyment of the country’s resources by future generations. In the emerging global economy, where the Internet, the news media and the information revolution shed light on business practices around the world, companies are more frequently judged on the basis of their environmental stewardship (CIBN). Partners in business and consumers want to know what is inside a company. This transparency of business practices means that for Nigerian banks, Corporate Society Responsibility (CSR) is no longer a luxury but a requirement.
Mazurkiewicz (2004) recognizes that concept has been developing since the early 1970s. There is no single, commonly accepted definition of “Corporate Social Responsibility” (CSR); there are different perceptions of the concept among the private sector, governments and civil society organizations. Depending on the perspective, Corporate Society Responsibility (CSR) may cover:a) A company running its business responsibly in relation to internal stakeholders(shareholders, employees, customers and suppliers);b) The role of business in relationship to the state, the nationa, as well as to globalinstitutions or standards; andc) Business performance as a responsible member of the society in which it operates and theglobal community.The first perspective includes ensuring good corporate governance, product responsibility, employment conditions, workers rights, training and education. The second includes corporate compliance with relevant legislation, and the company’s responsibility as a taxpayer, ensuring that the state can function effectively. The third perspective is multi-layered and may involve the company’s relations with the people and environment in the communities in which it operates, and those to which it transacts business. Too often, attaining Corporate Society Responsibility (CSR) is understood from the perspective of business generosity to community projects and charitable donations, but this fails to capture the most valuable contributions that a company has to make (Reyes 2002).Simply, many companies have found that Corporate Society Responsibility (CSR) has often had a positive impact on corporate profits. Of all the topics related to corporate social responsibility, it is environmental initiatives that have produced, so far, the greatest amount of quantifiable data linking proactive companies with positive financial results. Business for Social Responsibility (BSR), for example, emphasizes that investment in Corporate Society Responsibility (CSR) has promoted product differentiation at the product and firm levels. Some firms now produce goods and services with attributes or characteristics that signal to the consumer that this particular company is concerned about certain social and environmental issues.
Corporate Social Responsibility in Nigeria Banking Sector would be aimed at addressing the peculiarity of the socio-economic development challenges of the country (e.g. poverty alleviation, health care provision, infrastructural development, education, etc) and would be informed by socio-cultural influences (e.g. communalism and charity). They might not necessarily reflect the popular western standard or expectations of Corporate Society Responsibility (CSR) (e.g. consumer protection, fair practice, green marketing, climate change concerns, socially responsible investments, etc). As a result of the effect of the global economic meltdown the Central Bank of Nigeria (CBN) regulatory policies on the banking activities which led to the recent replacement of some Nigerian banks’ Chief Executive Officers even after the 89 banks that had hitherto existed in Nigeria were reduced to 25 in 2006. While 76 of them merged into the 25 mega banks, 13 banks were liquidated as an outcome of the implementation of the N25 billion minimum capital base for banks, the first phase of the most extensive and intensive banking reforms in post-independence Nigeria. There is no doubt that Corporate Society Responsibility (CSR) is becoming indispensable, though involuntary, in the contemporary business world as societal needs are making it imperative for the corporate organisations to be sensitive to happenings in their environments, which ensure more understanding and good relationship between the organisation and the society where they exist, since Corporate Society Responsibility (CSR) contributes to the wellbeing of the citizenry (Osho 2008).
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