THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON THE PROFITABILITY LEVEL OF A BUSINESS ENTITY

CHAPTER ONE

INTRODUCTION

1.0       BACKGROUND OF THE STUDY

Corporate social responsibility is define as the continuing commitment by business to behave ethnically and contribute to economic development while improving the equality of life of the workforce and their families as well as of the local community and society at large (Home and Watts, 2006).

Todays world is filled with cooperation of both providers of goods and services and customers of goods and services. The two parties need to function alongside so as to meet up with their expectations. Companies today need to patronage of their clientele or customers so that the goods and services produced can be turned into the requirement revenue, which leads to the profitability of the company. At the same time, the customers of the company’s product needs the company to also give back to the customers and society where they have taken from. This is known as corporate social responsibility.

Recent events have placed external responsibilities at the forefront of corporate management attention. It is hard to ignore riot, customer advocates, environmentalists and other socially active groups and government pressures. Socially oriented issues have been among the most critical problems of many problems of many companies in both the 1980’s and 90’s. As a result corporations are translating the concept of business corporations to society into a modus operandi for corporate management.

Generally, behind the table of enemy business is the profit motive behind its continuity is profit. It is the motives that drive owners, shareholders into buying shares and private owners investing the capital into business. It is the profit motive that leads to goods and services produced and its profit earning that ensures the continued existence and expansion of business. Meanwhile, this is not to say that immediate profit should be made which is responsible in the growth survival and adaptation of organisation should be over-emphasized.

A social responsibility neglected by a business at a particular time, a poor quality goods delivered to customers in the course of seeking immediate profit could result in less good corporate image of the business in the present dry. In a highly competitive market of branded goods and services, a bad image could be very devasting as sales may subsequently go down and profit making could be seriously affected.

Many business, firm have long taken an interest in the community in which they produce or sell their goods. And with the growth of large firms this interest is often society, but also such matters as education, health and social welfare, entertainment and the arts and environment.

Eneobong (1992) reports that Andrew Cornegie in his book “The Gospel wealth” cited two principles on the classic statement of corporate social responsibility these are:

1.           The charity principle

2.           The stewardship principle

3.           The charity principle required and more fortunate members of the society to assist its less personate members including the unemployed the handicapped, the sick and the elderly. The unfortunate could be added directly or indirectly through such institutions as churches settlement houses.

The stewardship principle, derived from the Bible requires business and health individuals to view themselves as the stewards or caretakers of their property.

Cornegies’s idea was that the rich held their money “In trust” for the rest of the society and can use it for any purpose deemed fit or legitimate. However, he also saw it as the role of business to multiply society’s wealth by increasing its own through prudent investment of the resources under its stewardship.

Nwa (1999) stated the following as the major social responsibilities which business owes its stakeholders.

a.           Shareholders – The business owes them a duty of achieving good returns on their investments and to pay reasonable dividend on capital.

b.           Employees – To pay adequate remuneration that signifies a fair pay for a fair day work and to train and develop it employees.

c.            Customers – To offer quality product that provides values for money and to deliver purchase promptly with after sales services.

d.           Government – To pay taxes and other levies promptly and to assist in creating employment opportunities for the citizens.

e.            Community members – To provide recreations and entertainment by sponsoring local events such of sporting activities, provision scholarship programmes for members of the community etc.

It is persistent to note that these demands of the environment on organisation are justified by the following reasons:

i.             Business receives its charter from the society and must respond to their needs.

ii.           Social involvement discourage additional government regulations and intervention.

iii.          The organisation sells product and services to the society. The society buys them thus enabling business to make profit and perpetuate in existence.