ANALYSIS OF THE ARGUMENTS FOR AND AGAINST
CORPORATE SOCIAL RESPONSIBILITIES IN NIGERIA
SUNDAY C. NWITE
SENIOR LECTURER
DEPARTMENT OF BANKING AND FINANCE
EBONYI STATE UNIVERSITY – ABAKALIKI
AND
DR. TITUS OKEY ENUDU
SENIOR LECTURER
DEPARTMENT OF BUSINESS ADMINISTRATION
ENUGU STATE UNIVERSITY OF SCIENCE AND TECHNOLOGY
ESUT – ENUGU.
PHONE NO: 080-37743134
EMAIL: [email protected]
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ABSTRACTFrom the point of view of neo-liberal economist such as Fiedman and Hayek, the prime function of any business enterprises is to generate profits, its central responsibility is to shareholders. The idea that business owners should also seek to perform social tasks is regarded as completely erroneous. Historical evidence suggests that not all business leaders have been formed simply to perform a commercial role in society. Numerous industrialists and entrepreneurs throughout the nineteenth century made significant contributions to their local communities. The early efforts of socially responsible business leaders are well documented. This paper aims to build an existing historical analysis of business philanthropy and social involvement by analyzing developments in post-war Britain. Three main historical developments are outlined. First, the early post-war years, deposit the formation of the welfare state, witnessed some notable efforts to engage business in society. These were mainly inspired by church-led organizations and Christian entrepreneurs. Second, the expansion of the corporate economy throughout the 1940s and 1950s placed increasing constraints on the social aspiration of business. Finally, from the mid – 1970s onwards there grew a more general interest in corporate responsibility. This was consolidated in 1980s as part of the general redefinition of state functions in this period, the role of business in addressing social problems became more prominent. Such political and policy developments, it was argued, have made a significant contribution towards enhancing the social role of business. Keywords: Social responsibility, private business, economic development, philanthropy, ethical practice, corporate responsibility.
Paper type: Research Paper
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INTRODUCTION
It is a known fact that government interference with market
mechanism, and control and regulation of the private business
become inevitable due to failure of the market system to fulfill the
economic and social aspirations of the society, via optimum utilization
of resources, near-full, if not full, employment, equitable distribution
of income and wealth, economic growth and stability. The greater the
failures of the market system in achieving these goals, the greater
the need for government interference, control and regulation of the
private business enterprises.
Nevertheless, another factor that is attributed to the increasing
role of the government in the economic system is the failure of
private business to recognize, accept and fulfill, their social
responsibilities. This implies that if business man fulfill their social
responsibilities, the need for government interference with private
business will be considerably reduced, if not eliminated. This work
wants to look at the implications of social responsibility of business in
economic growth of Nigeria.
CONCEPT OF SOCIAL RESPONSIBILITY
Social is an ethical ideology or theory that an entity, be it an
organization or individual has an obligation to act to benefit socially
at large. Social responsibility is a duty every individuals or
organization has to perform so as to maintain a balance between the
economy and the ecosystem.
A trade-off always exists between economic development, in the
material sense, and welfare of the society and environment. Social
responsibility means sustaining the equilibrium between the two. It
pertains not only to business organizations but also to everyone
whose any action impacts the environment.
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This responsibility can be passive, by avoiding engaging in
socially harmful acts, or active, by performing activities that directly
advance social goals.
Businesses can use ethical decision making to ensure their
businesses by making decisions that allow for government agencies
to minimize their involvement with the corporation.
For instance, Kaliski, (2001) if a company is and follow the
United Environmental Protection Agency (EPA) guidelines for
emissions on dangerous pollutants and even goes on extra stop to
get involved in the community and address those concern that the
public might have, they would be less to have the EPA investigate
them for environmental concerns.
A significant element of current thinking about privacy, however,
stresses self-regulation “rather than market or government
mechanisms for protecting personal information”.
Swire, (1997) according to some experts, most rules and
regulations are formed due to public outcry, which threatens profit
maximization and therefore the well-being of the shareholders, and
that if there is no outcry there often will be limited regulation.
HISTORICAL DEVELOPMENT OF SOCIAL RESPONSIBILITIES
Social responsibility dates back to the early days of capitalism
when people like Titus Salt demonstrated that society should not be
ruled only by market forces. Many events have been influential in
shaping the social responsibility agenda.
In 1848, Yorkshire wool baron Titus Salt creates Saltaire, a
model community outside Bradford for his staff, where each home
has running water.
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In 1911, David Lloyd George introduces the National Insurance
Act; it requires businesses to make contributions to unemployment
and sickness insurance for all staff.
In 1969, Ralph Nader founds the centre for responsible law in
the US to expose corporate abuses and lack of enforced regulation.
In 1971, Anita Roddick opens the first body shop branch in
Brighton. The company operates according to a strict ethical and
environmental policy.
In 1982, Business in the community is set up to forge links
between business, trade unions, government and communities.
In 1992, sustainable development dominates the Rio UN
conference on Environment and Environment and Development,
addressing environmental damage and world poverty.
In 1999, the Turnbull Report, recommends that companies’
Boards should focus and manage the full range of risks including
health, safety, environment and reputation.
In 2004, it was announced that from 2005 all listed companies
will have to provide an operating and financial reviewed with their
annual report, taking into account their social, environmental and
economic impact.
Social responsibility is a core value at Hess Corporation. The
company is committed to meeting the highest standards of corporate
citizenship by protecting the health and safety of employees,
safeguarding the environment and creating long-lasting, positive
impact in the communities where we do business.
Hess endorses the universal declaration on Human Rights and is
an active participant in three voluntary initiatives designed to protect
the environment, promote human rights, and encourage financial
transparency. The United States Global Compact, The Voluntary
Principles on Security and Human Rights and the Extractive Industries
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Transparency initiative. Hess is honored to have ranked 15th on
corporate responsibility officers’ 10 best corporate citizens 2009.
REASONS SURROUNDING CORPORATE SOCIAL RESPONSIBLE
Every business enterprise or organization are faced with some social
responsibilities to the environment and its inhabitant in different
dynamism. The following are some of the reasons surrounding
corporate social responsibility in Nigeria.
1. To promote the social welfare of the people: Promotion
and provision of standard health, education and cultural
services, a particular place generally owns by the citizenry some
social responsibilities of providing health education and cultural
services. This is because the organization enjoy natural
resources of the community or society.
2. To protect the environment against social hazards or
risks: In preventing environmental pollution, an establishment
or business organization aims the responsibility to the general
society to which it operate to ensure that it protect eh
environment against some social risks or hazards like pollution
or other industrial contamination of any source. In case of an
organization that spill oil, it should take adequate and proper
control of its wasted material to make some that it prevent
environmental pollution to the society at large.
3. Cooperating with the government in research and
development: A business organization is a separate entity
different from the owner by law. Therefore, the business owner
have it as a responsibility to corporate and collaborate with the
government in research and development of any sector of the
economy. As technology changed so also the need to improve
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on the standard of well being of the people probably through
product, invention, innovation and new product development.
4. Cooperating with the government in promoting social
values: A business organization set up in an environment
should help the government in promoting social values of the
people like building of good hospital, good road, good network
and pipe borne water for a better life standard of the people.
THE ARGUMENTS IN FAVOUR OF SOCIAL RESPONSIBILITIES
Fredman and Bavmol, two of the greatest economists of our
time, are opposed to the view that businessmen have many social
responsibilities to fulfill in the opinion of Friedman. The view that
corporations and labour unions should accept social responsibilities
shows a fundamental misconception of the character and nature of a
free economy.
He argues that in a free economy, there is one and only one
social responsibility of business to use its resources and engage in
activities designed to increase its profits so long as it stays within the
rules of the game, which is to say, engage in open and free
competition without deception of fraud. If businessmen do have social
responsibility other than making maximum profit for stockholders
how are they to know what it is.
In his opinion, assigning any social responsibility to private
entrepreneur other than profit maximization is a fundamental
subversive doctrine which undermines the very foundation of a free
society.
Baumol on the other hand is of the view that private business
should not be asked to assume the responsibility of fulfilling the social
and political goals of the society nor should they be expected to
allocate resources optimally for, in his opinion, a competitive system
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automatically rewards efficiency and punishes inefficiency, and where
it fails, fiscal measures – taxes and subsidies may be adopted to
correct the system and to encourage the business in favour of social
goals.
ARGUMENTS AGAINST SOCIAL RESPONSIBILITIES IN
ECONOMIC DEVELOPMENT
Some authors argue that even if it is accepted that businessman
have social responsibility, it is extremely difficult to fix it. As Niall
Fitzerald has remarked, “corporate social responsibility is a hard-
edged business decision” (Tol, 2007). Fixing corporate social
responsibility is extremely difficult because:
i. Social different persons
ii. It is not easy to fix social responsibility in practicable terms
because there are no standard rules.
iii. Private firms, even big corporations, do not have control over
the market mechanism of resources allocation. In addition, the
following arguments are put forward against assigning social
responsibility to businessmen.
i. Social responsibility is a matter of public policy, not a number of
business policy.
ii. Businessmen do not have legal powers or social sanction to
meddle with social welfare.
iii. Businessmen do not have legal powers to prevent anti-social
activities of others.
iv. Managers are not empowered to spend money on social welfare
beyond a limit.
v. Expenditure on social welfare often lead to rise in prices.
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vi. Businessmen’s social responsibility will make them more
powerful and will create conflict between the businessmen and
the government.
vii. As regards setting moral values corporations are not moral
agents.
Clearly, the views on whether businessmen have any social
responsibility, are divergent and arguments against assigning social
responsibility to businessmen are equally strong. The divergence of
views however, should not mean that private business has no social
responsibility. It is of course difficult to fire social responsibilities for
the businessmen and it would be unreasonable to expect the
businessmen to give up their profit maximization motive in favour of
social interest.
However, if one examines the argument, the social
responsibilities of businessmen, one would find that they are more
emotive than logical, and are not very convincing. For example, look
at Friedman’s argument that assigning social responsibility to private
business is contrary to the character and nature of a free economy.
The validity of this argument is limited in many respects as
maintained below:
First and foremost, Friedman would agree that if growth of
monopolies and concentration of economic power shake the very
foundation of the free society, some social responsibility has to be
fixed with social sanction as regards the governments power to
control the monopoly powers, big business houses influence the
political decisions and, in a way to rule the country with their invisible
hands’ and therefore, the process is the other way round.
Again, as regards to the argument that businessmen have the
sole objective of profit maximization, some economists object
strongly to profit being the sole objective of modem corporations. In
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their opinion, the profit maximization objective often leads to growth
of monopoly and concentration of economic power, and it is wrong to
say that the state will take care of monopolies because large
corporations use their money power to bring into power the
government of their choice. How can such a government control
monopolies in the real sense of the term. They believe that labour,
management and public have a much more legitimate claim to
corporate returns than the stockholders who are merely the passive
certificate holders with little knowledge of business or commitment to
business.
Equally, it may be unreasonable to expect businessmen to
replace their profit motive with economic welfare of the society, but it
is not unreasonable to expect from businessmen to desist from the
anti-social activities in which they often indulge e.g. fleecing the
consumer under conditions of scarcity, supplying adulterated,
substandard and spurious goods (especially foodstuffs and
medicines), black marketing, exploitation of labour (paying them
much lower ways than their productivity), not complying with efficient
treatment laws, polluting air and water in the residential area posing
risk to human survival, and so on.
PROBLEMS OF SOCIAL RESPONSIBILITIES IN NATIONAL
ECONOMIC DEVELOPMENT
In an independent assessment of Shell’s Oil Spill at Ogbodo,
Rivers State, in June – July, 2001, Terisa Turner, a world renowned
authority on political economy of oil corporations, exposed the falsity
of Shell’s Sabotage thesis. She declared; the claim of sabotage is
patently false. The oil companies have been claiming that the oil
spills, the pipeline explosions were all caused by sabotage. But there
is no evidence to this so far.
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Since the WECD gave global currency to the concept of
sustainable development the international business sector has
systematically counted sustainable development.
The first round of this incongruous courtship manipulated itself
in the business sector’s preference for sustainable economic
development as the primary determinant of sustainable development
by relating to environmental development as an after thought. By
enunciating corporate social responsibility, the international business
sector aspires to demonstrate the human face of business as its
strategies to modify the citizens in countries of its operations.
Notwithstanding, its “human face” of business policy, Shell has
not been able to meaningfully address the environmental challenges
of sustainable development like other corporations, Shell has
appropriated sustainable development without being able to avoid a
collision with environmentalists and environmental imperative.
PROSPECTS OF EFFECTIVE MANAGEMENT OF SOCIAL
RESPONSIBILITIES
The effective management of social responsibility by an organization
has following prospect, amongst which are:
1. It brings about reduction of crime: The concept of social
responsibility ancore a duty of providing social benefit to the
host community, if the organization that goes the business
effectively comply with this duties, naturally people who would
have attack them due to non-compliance will be drastically
reduced therefore effective management of social responsibility
brings about reduction of crime by the host community.
2. Provision of employment in the rural area: The business
organization through the principle of social responsibility and its
management create and provide employment to the host
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community in which they operates. If the business organization
did not or refused to comply with the provision of employment
the host community can revolt against the business enterprise a
case study of Niger Delta crisis.
3. It is a source of development to the rural area (or the
host community): The employment opportunities provides by
the business organization to both the host community members
and outsiders will in turn brings development to the community
at large. Therefore effective management of social
responsibilities bring about development to the host community.
4. It helps to improve the social environment of the people:
social responsibility of an organization if adheared to will help in
improving the social environment of the people like provisions of
some social amenities by the organization to the citizens.
5. It leads to provision of jobs and achievement of a sustainable
economic growth.
6. It engenders a friendly society among the host communities and
the organizations.
7. It creates securities for the organization as the host community
takes it upon itself to safeguard the assets of the firm.
8. It gives the firm, organization or business enterprise a
favourable publicity.
9. It boost the productivity of the staff of the organization.
CONCLUSION
It is quite obvious to any observers that Niger Delta residing in
the areas of oil exploration been a significantly higher explosive to
environmental risks than, say, residents of Kaduna who enjoy much
higher benefit from the exploits of oil exploration without incurring
any environmental risks arising from such exploration.
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Nevertheless, at the corporate level, the issue of social
responsibility has two dimensions. Meeting social responsibility and
aligning the working of the corporations with the general welfare of
the society such as keeping social gain at per with private gains. The
corporate sector seems to be fairly well aware of its social
responsibilities as far as financial contributions towards social welfare
activities are concerned. The big corporate have made significant
contribution to the promotion of social welfare activities like building
of school, colleges, charitable hospitals, and dispensaries, research
and technology institutes, creating species chairs for professors of
excellence in the universities and so on. But when the issue is
examined in the overall social perspective, the working of the
corporate sector leaves much to be desired. The corporate sector
shows little or no concern for environment and water pollution and
safety for human life.
Consider, for example, the tragic case of Bhopal gas leak and
loss of human life. Exploitation of labour (paying wages less than
their productivity), has become an accepted norm of the corporate
sector. A much more dangerous trend set in India for example is the
use of money power by big business houses to corrupt the politicians,
political environment and bureaucracy for personal gains. India is
rated to be the second or third corrupt nation in the world.
However, it is unfair to hold business houses alone responsible
for the widespread corruption is the country.
RECOMMENDATIONS
Based on the above work the following recommendations are
proffered.
i. That government should set up a regulatory body to oversee the
total compliance of private business to social responsibility.
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ii. Private business or organization should always try to uphold her
responsibilities towards the shareholders, employers consumers,
the government and the society as a whole.
iii. Businessmen should be given legal power to prevent anti-social
activities of others.
iv. Businessmen’s social responsibility should be given power to
settle conflict between the businessmen and the government.
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