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

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO 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 (2012) 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 (2015) 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.

iv. Better social environment benefits both the society and business. The society gains through employment opportunities and goods and services while the business gain in terms of getting its workforce from the society which is also the consumer of it’s product and services.

v. Businesses have great power, which should be matched with equal amount of responsibility.

vi. Internal activities of the enterprise have impact on the external environment.

vii. Social responsibility creates a favourable public image.

viii. Social responsibility can also be in the interest of the stakeholders.

ix. The longer a business stays in an environment, the higher the need for it to contribute towards that development of such an environment.

x.  Social responsibility problems, of allowed to persist, will ultimately affect the general public, institutions and organisations operating in the environment. Therefore, organisations contribute to the solution of social problems both in their interest and in the interest of the entire society.

1.2   STATEMENT OF THE PROBLEM

The following are the statement of the problem of research work.

1. So many businesses in Nigeria are not giving back to the society and community where they are taking from.

2. It is difficult to define and measure what make up a good social responsibility.

3. There are no standards for measuring corporate social responsibility.

4. There are no standards for measuring ethics and performance in the Nigeriabusiness environment.

5. Sometime companies, businesses and firms are compelled beyond measure before they can perform the social responsibility.

6. So, many organisations see social responsibility as a waste of resources and money.

7. So many organisations see social responsibility as not being part of their corporate objectives.

1.3   OBJECTIVE OF THE STUDY

The following are the objective of the study:

1. The appraise the various corporate social responsibility of companies.

2. To appraise the effect of corporate social responsibility on company’s profit.

3. To appraise how corporate social responsibility can be properly managed. 

4. To make necessary recommendation at the end of the research work.

1.4     SIGNIFICANCE OF THE STUDY

The successful completion of this study is expected to reveal clearly the importance of corporate social responsibility in a business entity. This study will also serve as a reference material to other future researcher that may be interested in this area of study. The findings and outcome of this research study will also go along way in contributing meaningfully to the vast pools knowledge that already exists on corporate social responsibility.

1.5    DEFINITION OF TERMS

A.  Stakeholder: These are the beneficiaries form a business. They include customers, government, employees, shareholders, creditors, suppliers etc.

B. Shareholders: They are people that have financial interest in the business.

C.Management Account: This is the total financial representation of business, which is used for decision-making.

D. Cash flow: This is a budgeted analysis of sources and application of funds.

E. Budget: it is the financial representation of a business inform of a statement of all income and expenses.

F.  Profitability: It is the excess of surplus of production of an organisation over it cost of production.

G. Productivity: it is being efficient in an industrial production.

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