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| Pages: 74
A STUDY ON THE IMPACT OF FIRM PROFITABILITY ON CSR ACTIVITIES BY FIRMS IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
As Nigerian business environment becomes complex and dynamic, contemporary organizations operating in Nigeria are witnessing greater influence and pressure from interest groups such as stronger labour unions, more active consumer groups and also increased government regulations have brought about new pressures on the Board of Directors of organisations to be socially responsible. Modern business organisations are under enormous pressure from various interest groups which expect these organisations to be favourably disposed towards the alleviation or eradication of some of their problems. (Amaeshi and Adi,2006) Various views on the business ethic has been written by many theorists, some have nothing to do with business, a strong organizational culture founded on ethical principles and sound values is a necessary foundation for organisational success or survival. Business ethics is the study of people rights and duties; the moral rules that people apply in making decisions and the nature of the relationship among people. Ethic is a set of rules, values and standards governing the products of members of a profession, existing values and the expectation of the social environment (Whetten, Rands and Godfrey,2002). In performing its ethical responsibility, businessmen should not cheat, steal, lie, bribe or take bribe, besides business organization must not engage in indiscriminate employment; false advertisement and, produce defective product or encourage the consumption or harmful or hazardous product. The business organisations are self-constrained to exhibit some sense of social responsibility by adjusting or responding positively to these problems. Based on this, businesses are not only interested in the quality of goods and services they produce, but their business environment as well. They appreciate that, good images and acceptance from the public could mean substantial enhancement of long-run profits which remains the main objective of any business organisation. The achievement of the organiational objectives determines its corporate social responsibility (CSR) performances of organisation (Goss and Roberts, 2007). xiv In performing ethical responsibility, businessmen should not cheat, steal, lie, bribe or take bribe, besides business organization must not: engage in indiscriminate employment, false advertisement and produce defective product or encourage the consumption or harmful or hazardous product. Any business organization that practice ethics are expected to derive the following advantages: generate greater drive and efficiency, attract high caliber of people and develop profitable relations with its constituencies The impact of legitimate management activities on people and on their physical and social environment is what they produce. i.e their product. Management of any business organization is responsible for that, since they operate in an environment, produce goods and services for the society and employ people in its operation. Therefore, these organisations are increasingly expected to anticipate, alleviate, eradicate and or resolve social problems encountered by the society as a result of their operation. According to David and Guler (2008), corporate social responsibility whether of a business, government and non-governmental, or any organization may arise in two ways. It may arise out of the social impacts of the organization, or arise as problems of the society itself. Both are of concern to management because the organization which the managers oversee, lives in the society. The first one deals with “what an organization does to the society” and the second one deals with what an organization can do for the society. It is accepted that the business organizations can solve societal problems and being ethically and socially responsible. It must make profit for growth and development, continuity and/or succeed in the dynamism of the competitive environment.The issue of CSR in Nigeria is brought into perspective by several peculiarities in Nigeria as a developing country faced with seemingly overwhelming growth and development challenges in the political, economic and social dimensions. Despite the challenges, several prospects exist, each being associated with massive expansion of business activities than the present levels as business is essential for the development and wellbeing of a society. According to a forecast of bodies as diverse as the International Monetary Fund, the European Union and investment firms such as Goldman-Sachs, Nigerian economy will become the 19th largest in the world by 2025 (Jacques, 2009).
The Nigerian economy has been named as one of the Next 11 (N11) economies, identified as having high potential of becoming one of the world's largest economies in the 21st century (O’Neill, Wilson, Purushothaman & Stupnytska, 2005). Meanwhile, Nigeria nurses her homegrown Vision 20:2020 wherein by 2020, Nigeria will be one of the 20 largest economies in the world.
The actualization of the above potentials and targets would require a more private-sector led economy as the preferred way of accelerating the pace of economic growth and development in developing countries. In this regard, Osemeke (2012) opines that the prospect for private sector organizations led-growth in Nigeria is very high. Operators in the private sector, who primarily aim at profit maximization, control a lot of assets; have billions in cash at their disposal. Thus, private sector organizations exert a lot of power in the community and in the national economy.
Another reality which brings CSR into perspective is the high inflow of foreign direct investment (FDI) in Nigeria. The United Nations Conference on Trade and Development (2012) reports that over the next several decades, sub-Saharan Africa will continue to attract the highest rates of foreign direct investment (FDI) inflows per capita of any developing region. Moreover, Nigeria is the second largest recipient of foreign direct investment (FDI) in Africa following South Africa (Morisset, 2001; United Nations Conference on Trade and Development, 2013). Such a high level of foreign investment induces a high level of business activity, thereby bringing CSR into perspective.
A high growth potential, high potential for a private-sector led growth, weak regulatory systems and high FDI inflows have all been advocated as reasons for CSR, especially in Nigeria. This creates the need to crucially interrogate the factors influencing CSR activities by companies. The few research works on CSR for Nigeria that exist usually focus on oil companies and on the relationship between CSR and financial performance of firms. This research paper seeks to contribute to the existing body of work in this area by examining the determinants of corporate social responsibility using companies in Nigeria.
1.2 STATEMENT OF THE PROBLEM
In Nigeria, the activities of some multinational companies have been identified as questionable or even unethical because of the harms they perpetrate on the society (Trevino,2000). With emphasis on the Niger Delta, Adeyanju (2012) reports that some ten years ago, the Nigerian society was characterized by fragrant pollution of the air, of the water and of the environment as most corporate organizations are concerned about what they can take out of the society, and de-emphasized the need to give back to the society.
In a similar view, Osemene (2012) opines that many organizations in Nigeria are driven by the need to make more and more profits to the detriment of all the stakeholders as some do not adequately respond to the needs of host communities, employees' welfare (cheap labor often preferred), environmental protection and community development. This has translated to negative integrity and reputation on the part of corporate identity as people perceived this as exploitation and greed for profitability and wealth maximization within a decaying economy of Nigeria (Adeyanju, 2012).
Corporate Social Responsibility as a concept is relatively new in Nigeria and is one of the emerging issues that confront modern-day businesses (Helg, 2007; Uwuigbe & Egbide, 2012). Amaeshi, Adi, Ogbechie and Amao (2006) assert that most CSR initiatives in Nigeria are ad hoc and not always sustained. From another viewpoint, Osemene (2012) acknowledges the popular opinion that CSR initiatives implemented by some companies in Nigeria are mere superficial window-dressing and lip-service, widely believed by many to be mere campaigns by organizations to promote corporate brands. As such, whenever an organization does something supposedly "big" for the society, such a company and its management are eulogized for being caring and philanthropic by the Nigerian public, a majority of which are ignorant of CSR.
In developed economies the concept of business has changed from profit making activities to social welfare activities where businesses are not only responsible to its shareholders but also to all of its stakeholders (Islam, 2012). As a relatively new phenomenon in Nigeria the main influencing factors driving the CSR agenda in Nigeria have been foreign (Uadiale & Fagbemi, 2012). Thus, there is an apparent lack of a fully Africanised CSR agenda and the need for a Nigeria-specific CSR practice that is contextually relevant and takes the prevailing socioeconomic realities of the country into consideration.
As a result of above, research focusing on CSR practice and activities in developing countries like Nigeria remains scarce, with only an existing handful of empirical studies (Duke & Kankpang, 2013; Uwuigbe & Egbide, 2012; Muthuri &Gilbert, 2010; Helg, 2007). The need for more in-depth studies into corporate social responsibility in Nigeria is a research gap that this study intends to fill. In this regard, a fundamental question exists: What influences corporate social responsibility behavior and activities of Nigerian firms? Several other more specific questions which form the research questions of this study are:
1.3 OBJECTIVES OF THE STUDY
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
As Nigerian business environment becomes complex and dynamic, contemporary organizations operating in Nigeria are witnessing greater influence and pressure from interest groups such as stronger labour unions, more active consumer groups and also increased government regulations have brought about new pressures on the Board of Directors of organisations to be socially responsible. Modern business organisations are under enormous pressure from various interest groups which expect these organisations to be favourably disposed towards the alleviation or eradication of some of their problems. (Amaeshi and Adi,2006) Various views on the business ethic has been written by many theorists, some have nothing to do with business, a strong organizational culture founded on ethical principles and sound values is a necessary foundation for organisational success or survival. Business ethics is the study of people rights and duties; the moral rules that people apply in making decisions and the nature of the relationship among people. Ethic is a set of rules, values and standards governing the products of members of a profession, existing values and the expectation of the social environment (Whetten, Rands and Godfrey,2002). In performing its ethical responsibility, businessmen should not cheat, steal, lie, bribe or take bribe, besides business organization must not engage in indiscriminate employment; false advertisement and, produce defective product or encourage the consumption or harmful or hazardous product. The business organisations are self-constrained to exhibit some sense of social responsibility by adjusting or responding positively to these problems. Based on this, businesses are not only interested in the quality of goods and services they produce, but their business environment as well. They appreciate that, good images and acceptance from the public could mean substantial enhancement of long-run profits which remains the main objective of any business organisation. The achievement of the organiational objectives determines its corporate social responsibility (CSR) performances of organisation (Goss and Roberts, 2007). xiv In performing ethical responsibility, businessmen should not cheat, steal, lie, bribe or take bribe, besides business organization must not: engage in indiscriminate employment, false advertisement and produce defective product or encourage the consumption or harmful or hazardous product. Any business organization that practice ethics are expected to derive the following advantages: generate greater drive and efficiency, attract high caliber of people and develop profitable relations with its constituencies The impact of legitimate management activities on people and on their physical and social environment is what they produce. i.e their product. Management of any business organization is responsible for that, since they operate in an environment, produce goods and services for the society and employ people in its operation. Therefore, these organisations are increasingly expected to anticipate, alleviate, eradicate and or resolve social problems encountered by the society as a result of their operation. According to David and Guler (2008), corporate social responsibility whether of a business, government and non-governmental, or any organization may arise in two ways. It may arise out of the social impacts of the organization, or arise as problems of the society itself. Both are of concern to management because the organization which the managers oversee, lives in the society. The first one deals with “what an organization does to the society” and the second one deals with what an organization can do for the society. It is accepted that the business organizations can solve societal problems and being ethically and socially responsible. It must make profit for growth and development, continuity and/or succeed in the dynamism of the competitive environment.The issue of CSR in Nigeria is brought into perspective by several peculiarities in Nigeria as a developing country faced with seemingly overwhelming growth and development challenges in the political, economic and social dimensions. Despite the challenges, several prospects exist, each being associated with massive expansion of business activities than the present levels as business is essential for the development and wellbeing of a society. According to a forecast of bodies as diverse as the International Monetary Fund, the European Union and investment firms such as Goldman-Sachs, Nigerian economy will become the 19th largest in the world by 2025 (Jacques, 2009).
The Nigerian economy has been named as one of the Next 11 (N11) economies, identified as having high potential of becoming one of the world's largest economies in the 21st century (O’Neill, Wilson, Purushothaman & Stupnytska, 2005). Meanwhile, Nigeria nurses her homegrown Vision 20:2020 wherein by 2020, Nigeria will be one of the 20 largest economies in the world.
The actualization of the above potentials and targets would require a more private-sector led economy as the preferred way of accelerating the pace of economic growth and development in developing countries. In this regard, Osemeke (2012) opines that the prospect for private sector organizations led-growth in Nigeria is very high. Operators in the private sector, who primarily aim at profit maximization, control a lot of assets; have billions in cash at their disposal. Thus, private sector organizations exert a lot of power in the community and in the national economy.
Another reality which brings CSR into perspective is the high inflow of foreign direct investment (FDI) in Nigeria. The United Nations Conference on Trade and Development (2012) reports that over the next several decades, sub-Saharan Africa will continue to attract the highest rates of foreign direct investment (FDI) inflows per capita of any developing region. Moreover, Nigeria is the second largest recipient of foreign direct investment (FDI) in Africa following South Africa (Morisset, 2001; United Nations Conference on Trade and Development, 2013). Such a high level of foreign investment induces a high level of business activity, thereby bringing CSR into perspective.
A high growth potential, high potential for a private-sector led growth, weak regulatory systems and high FDI inflows have all been advocated as reasons for CSR, especially in Nigeria. This creates the need to crucially interrogate the factors influencing CSR activities by companies. The few research works on CSR for Nigeria that exist usually focus on oil companies and on the relationship between CSR and financial performance of firms. This research paper seeks to contribute to the existing body of work in this area by examining the determinants of corporate social responsibility using companies in Nigeria.
1.2 STATEMENT OF THE PROBLEM
In Nigeria, the activities of some multinational companies have been identified as questionable or even unethical because of the harms they perpetrate on the society (Trevino,2000). With emphasis on the Niger Delta, Adeyanju (2012) reports that some ten years ago, the Nigerian society was characterized by fragrant pollution of the air, of the water and of the environment as most corporate organizations are concerned about what they can take out of the society, and de-emphasized the need to give back to the society.
In a similar view, Osemene (2012) opines that many organizations in Nigeria are driven by the need to make more and more profits to the detriment of all the stakeholders as some do not adequately respond to the needs of host communities, employees' welfare (cheap labor often preferred), environmental protection and community development. This has translated to negative integrity and reputation on the part of corporate identity as people perceived this as exploitation and greed for profitability and wealth maximization within a decaying economy of Nigeria (Adeyanju, 2012).
Corporate Social Responsibility as a concept is relatively new in Nigeria and is one of the emerging issues that confront modern-day businesses (Helg, 2007; Uwuigbe & Egbide, 2012). Amaeshi, Adi, Ogbechie and Amao (2006) assert that most CSR initiatives in Nigeria are ad hoc and not always sustained. From another viewpoint, Osemene (2012) acknowledges the popular opinion that CSR initiatives implemented by some companies in Nigeria are mere superficial window-dressing and lip-service, widely believed by many to be mere campaigns by organizations to promote corporate brands. As such, whenever an organization does something supposedly "big" for the society, such a company and its management are eulogized for being caring and philanthropic by the Nigerian public, a majority of which are ignorant of CSR.
In developed economies the concept of business has changed from profit making activities to social welfare activities where businesses are not only responsible to its shareholders but also to all of its stakeholders (Islam, 2012). As a relatively new phenomenon in Nigeria the main influencing factors driving the CSR agenda in Nigeria have been foreign (Uadiale & Fagbemi, 2012). Thus, there is an apparent lack of a fully Africanised CSR agenda and the need for a Nigeria-specific CSR practice that is contextually relevant and takes the prevailing socioeconomic realities of the country into consideration.
As a result of above, research focusing on CSR practice and activities in developing countries like Nigeria remains scarce, with only an existing handful of empirical studies (Duke & Kankpang, 2013; Uwuigbe & Egbide, 2012; Muthuri &Gilbert, 2010; Helg, 2007). The need for more in-depth studies into corporate social responsibility in Nigeria is a research gap that this study intends to fill. In this regard, a fundamental question exists: What influences corporate social responsibility behavior and activities of Nigerian firms? Several other more specific questions which form the research questions of this study are:
1.3 OBJECTIVES OF THE STUDY
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