The standard and classical assumption that most of us have learnt over the years in school and still see in practice is that business main objective for existence is to strive to maximize profits. However, there are few exemptions to this all important objective of business and that is for non-for-profit making organisations.
Objectives of business
Profit maximization is the process by which a firm determines the price and output level that returns the greatest profit, where marginal cost is equal to the marginal revenue from the economist point of view. The theory of a firm tends to make this assumption because despite the growing importance for market survival in the face of serious competition, the need for growth and expansion and the frequent call for corporate bodies to be socially responsible. Creating profit appears to be the most significant single objective of organisations in our market based economy.
Recently, some of our corporate organisations have decided to take up other equally important objectives of business from stakeholders’ point of view one of them being Corporate Social Responsibility (CSR). CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business is a form of corporate self-regulation integrated into a business model. In some models, a firm’s implementation of CSR goes beyond compliance and engages in “actions that appear to further some social good, beyond the interests of the firm and that which is required by law.”
CSR is a process with the aim to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.
The term “corporate social responsibility” came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization’s activities have an impact.
Expectedly, shareholders are rational business people; they are interested more in their wealth maximisation expectation than any other thing because that was the primary drive for them to go into business.
In order to balance the act between the profit maximisation objective of shareholders and the need to satisfy other stakeholders’ interest, management sometimes get excited along the line in meeting other objectives as already stated above without sacrificing the owners’ expectations. Indeed, this is where the issue of conflict of interest ‘accusation’ of management emanated from in the world of corporate governance.
In Ghana today, you will noticed that so much emphasise is being given to the issue of corporate social responsibility by many corporate bodies.
Give and Get
Scarcely can you open any newspaper today without seeing one photograph or story of people presenting or donating one thing or the other under the pretence that they are being socially responsible. The concept is good no doubt about that but the focus and quantum of our CSR leave much to be desire.
It is always exciting to give back to the society from where the profit came from in the first instance. We all know that giving is scriptural and it is God’s injunction which is well captured in His word, ‘’Give, and you will receive. Your gift will return to you in full pressed down, shaken together to make room for more, running over, and poured into your lap. The amount you give will determine the amount you get back.” Luke 6: 38 (NLT)
In addition, every living thing stays alive by giving back to the nature. From the elementary science, we learnt that terrestrial plants use atmospheric carbon dioxide from the atmosphere, to generate oxygen that sustains animal life and those animals too emits carbon dioxide which the plants takes in for their survival and this is vice versa. This goes on to underscore the fact that giving is mandatory and must be seen as such by all to stay healthy and impactful.
Social Impact vs. PR Spin
Why do companies invest in CSR? The reasons are varied: to manage the public perception, that is to bolster their brand in the eyes of investors and consumers, to ease their supply chains, to save money, to increase their access to capital, to differentiate themselves from competitors and sometimes because it’s just the right thing to do.
Wesley Hutchinson, Wharton marketing professor and faculty director of the Wharton Behavioural Laboratory, recently conducted a survey with top corporate leaders to get their views on CSR. The survey asked executives to explain why they embark on CSR initiatives from the perspective of corporate strategy.
The vast majority, about 80% said they do so to improve their “general corporate reputation.” The second most popular reasons for investing in CSR were that it “directly affects brand image of their products and services” and that CSR is a “matter of good corporate citizenship.” Executives also said that investments in CSR “help attract and retain desired employees” and “directly affect sales and profits for our products and services. “
If above reasons are genuine, why is it that our businesses here pay lip service to something as important as CSR with the kind of things we are being fed with every day from the pages of our newspapers?
Beyond the PR
It is expected that most corporate ‘do-gooders’ should approach their social goodwill with more eye toward impact on the community rather than on themselves. There is too much emphasis on publicity of those events more than the social effect of the work itself. The reason may not be too far-fetched. It is either they are looking for some government patronage. This they do by giving impression that they are supporting the economic agenda of the government of the day, so that they continue to receive regular flow of business. It may also be that they just to stay a little bit more relevant in the minds of the people with some few noises in the pages of newspaper to keep their fading names refreshed for another few months.
How do you describe a situation where a company forced its staff to engage in a weekend sweeping and cleaning exercise of their neighbourhood, call the press to cover the event and they term such two hours programme a CSR?
CSR as a policy.
Look at this statement for better understanding of what a CSR should be. This is credited to Garratt Hasenstab, Director of Sustainability at the Verdigris Group, a real estate development and consulting firm, “Our CSR policy is at the core of our daily operations and guides our future progress. We benefit from these efforts in a number of ways. Our clients want to work with us because we are focused on a healthier and more productive world. Our development clients can rely on us to develop their projects to the highest standards of energy efficiency and occupant health, while creating an architecturally resonant project that reflects our mission and vision. Of course we save money by operating more efficiently which is a direct benefit of our CSR efforts, however, the true value we receive from our on-going initiatives is that of social good will – we believe that setting a good example is the greatest benefit in that we inspire other organizations, companies and individuals to ‘up their game’ when it comes to social and environmental responsibility, which in turn encourages further inspiration in the community leading to a more enlightened perspective on how to run ones business or lead one’s life.”
From the policy objectives above, we can bring at least Seven to Eight major points that are fundamental that drives the company’s CSR programme. Strong intentions like Focus, Reliability, Highest Standards, Efficiency, Social goodwill, Inspirational, Exemplary and Enlightened perspective.
Can we find these intents in the reason why our own businesses engage in CSR here? Surely we are not yet there. Most of the things we called CSR here are still at the peripheral state of development.
We know that there are inconsistencies with the way most of our companies handles the business of corporate social responsibility (CSR). May be because of the elementary stage we are in, in the area of Industrialisation but we must be seen to be taking steps towards institutionalising the real CSR in our communities or society not this current laughable, theatre of absurd we call CSR.
We are constantly being reminded by government that the work of nation building cannot be left into the hands of Government alone. We all have collective responsibility in this respect. Our businesses corporate citizenship does not end at the point of being a law abiding citizen, paying our taxes and exercising other civic responsibilities. It goes beyond that.
Lessons from abroad
There are so many useful lessons we can draw from the established world in the areas of CSR.
Individuals like Bill Gates, John D. Rockefellers, not forgetting our own Nwankwo Kanu (the Nigerian ex-footballer). These people have gone beyond doing donations or one- off contribution schemes, rather they have moved to the extent of establishing foundations to give back to the society from where the resources were derived from in the first place.
Therefore, our corporate organisations should wake up from their deep sleeps and engage in something more enduring and classical for us to see. They should spare us the frustration of seeing programmes like paying for a musician to come to Ghana for a musical concert and put many bill boards all over town and call that a corporate social responsibility.
We need organisations that will vote some reasonable percentage of their annual profits say about 2 to 3% towards health care delivery, job creation, rural development, welfare of less privileged, old people homes, students in the rural suburbs who have never tasted city life before, encouraged them during their long vacation by organising summer coaching programmes for them in the city centres for two to three weeks fully paid for by the company to enable them have some sense of belonging, experience what awaits them if they performed very well in their studies. That is enduring and impactful.
We know that resources are scarce, and companies make CSR decisions as part of a complex business process. What we are looking for is a company that has good values and takes a long-term perspective of their environment over the pursuit of short-term profit objective.
Clearly, companies choose which CSR issues to devote time and money toward based on their own economic interests but that interest should be beneficial not only to the company but indeed to the entire community from where the profit came from.
Do Public Care?
The public do care about firms or businesses that take their interest at heart. The challenge here is that we don’t have the voice immediately to make them behave more responsible socially.
According to a study in the US last year by Nielsen, a media company, 62% of people surveyed said they prefer to work for companies that have implemented programs to give back to society. A separate study last year by another firm LRN, a provider of compliance management applications and services, found that 82% of American workers said they would be willing to be paid less to work for a company with ethical business practices than receive higher pay at a company with questionable ethics who are only interested in their pockets (profits) at the expense of the society they claimed to be part of. That tells us how much people out there take the issue of CSR in their day to day decision making as to where they buy from or who they work with.