Effect Of Corporate Social Responsibility On Profitability Of Listed Deposit Money Banks In Nigeria

CHAPTER ONE INTRODUCTION
1.1    Background to the Study
The primary objective of a firm is to maximize shareholders‘ value by producing goods and services that meet the needs of the society. The economic operations of firms have drawn significant attention of their stakeholders, for example, employees, suppliers, unions, customers, investors, creditors, regulators and directors. These stakeholders now demand more transparency and accountability from firms by mounting considerable pressure on them to carry the society along in their economic decisions. Corporate Social Responsibility (CSR) refers to the practice whereby corporate entities voluntarily integrate both social and environmental issues into their business decision making and operations. However, CSR in recent times implies that companies voluntarily integrate social and environmental concerns in their operations and interaction with stakeholders. However, some arguments suggest that CSR is just a reminder that the quest for profit should be considered alongside social and environmental considerations (Manuel & Lúcia, 2007). Branco and Rodrigues (2008) hold the view that CSR is analyzed as a source of competitive advantage and not an end in itself.
In effect, the concept of CSR has evolved from being regarded as detrimental to a company‘s profitability, to being considered as somehow benefiting the company as a whole, at least in the long run. Corporate managers have found a need that the environment in which they operate should be catered for because their intermediate and macro environments have a direct impact on the attainment of their corporate goals, objectives and mission statements. Therefore, the purpose of profit-making organizations is to maximize profit through optimal utilization of available resources. It is important to note that profitability is an important factor to companies, because it is one of the major purposes for which companies are established. 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 now frequently assessed on the basis of their environmental stewardship in addition to their ability to make profit. Partners in business and consumers want to know what is inside a company. This transparency of business practices means that for banks in Nigeria, CSR is no longer a luxury but a necessity.
Mazurkiewicz (2004) recognizes that the concept of CSR has been developing since the early 1970s. Therefore, there is no single, commonly accepted definition of CSR. There are different perceptions of the concept among stakeholders. CSR in banking sector is aimed addressing the peculiarity of the socio-economic development challenges of the country (e.g. poverty alleviation, health care provision, infrastructure 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 CSR (e.g. consumer protection, fair practice, green marketing, climate change concerns, and social responsible investments).
Companies are assumed to be socially responsible because they anticipate a benefit from their actions. Examples of such benefits might include reputation enhancement, the ability to charge a premium price for its outputs, or the use of CSR to recruit and retain high quality workers. These benefits are presumed to offset the costs associated with CSR, since resources must be allocated to allow the firm to achieve CSR status, while a key indicator to determine the true worth and value of modern organizations is their ability to give back to the society part of their income through some mutually beneficial initiatives (Nkanbra & Okorite, 2007).
There is no doubt that CSR is becoming indispensable, though involuntary, in the contemporary business world as societal needs are making it imperative for the corporate organizations to be sensitive to happenings in their environment, which ensure more understanding and good relationship between the organization and the society they exist, since CSR contributes to the wellbeing of the citizenry (Obaloha, 2008). CSR is one of the most dynamic, complex and challenging areas that business leaders face (Gwynne, 2009). It is arguably one of the most critical issues in business-society relationship thus bringing public interest companies under pressure to take active role in making the society a better place to live in.
The concept of CSR is also regarded as having emerged from the environmental perspective which is about how to manage physical resources so that they are conserved for the future. Therefore, CSR is about the economic performance of the organization itself. CSR calls for economic growth that can relieve the great poverty of less developed countries, based on policies that sustain and expand the environmental resource base. Nigerian banks responded to CSR over the years when they recognized their obligations to the banks‘ stakeholders and to the society since CSR enhance their reputations. Elkington (2008) asserts that companies should not only focus on enhancing its value through maximizing profit and outcome but concentrate on CSR issues equally. In line with Elkington (2008) assertion, Nigerian banks have spent billions of naira as their contribution towards addressing the peculiarity the social economic development challenges of the society. The principal beneficiaries of banks‘ CSR policies are in the areas of healthcare, education, security, housing, agriculture, arts and tourism, sports, charity organizations, religion, social clubs, government agencies, youth development and public infrastructure development.