Corporate Social Responsibility in Banking

somatic wholesome-disposed Responsibility in BankingAbstract In todays global economy, bodied social responsibility (CSR) is a core air divisioning of bodied strategy. As a result CSR emerge as a safeguard to protect financial scandals and diminish reputation of the banks. It excessively advocates and kit and boodle to minimize the conflicts with stakeholders. Corporate Social Responsibility (CSR) designed to respond to spacious unmet needs of the society in the achievement of long term and brutal art value. Especially commercial banks play an important role in implementing various social and philanthropic programs to help disadvantaged people of the country. To reinforce, CSR activities, banks induct foc using upd the atomic number 18a of market place, take in place, biotic community and milieual policy. The compendium in the study was targeted to understand the overall somatic responsibility attitude in the banking celestial sphere of Bangladesh.Keywords Co rporate Social Responsibility, Commercial Banks, Bangladesh.Introduction zero(prenominal)-a-days corporate strategy planner focuses their concentration on riches maximization earlier than profit maximization. The main cause is the intense market competition. So, they divert mentality from conventional business to social business. In addition, recent financial scandals eg, Enron, Parmalat, Worldcom etc entertain forced corporate executives, globally, to contemplate a broader strategy beyond the cerebrate view of stockholders wealth maximization.The impact of business on the society has deform a crucial bother. As a result, banks are emphasized on social, honourable and environmentally amenable approaches to business activity. Bank examine the environmental effect of projects in loan approval process and no projects are approved which are detrimental to the environment. Commercial banks are well adjust with Bangladesh Banks guidance on this aspect. They believe in the ne ed to focus on poverty alleviation through and through education and health care, for long consort realise of the nation.Recent theories of CSR (Baron (2001), McWilliams and Siegel (2001), Bagnoli and Watts (2003)) assert that firms engage in profit-maximizing CSR. That is, companies are assumed to be socially responsible because they anticipate a benefit from these actions. The World transmission line Council for Sustainable Development (WBCSD) has given the quest definition of CSRCSR is the task of a business to contribute to sustainable economic development, workings together with workers, their families, the local community and society in general to purify quality of life.Barnea and Rubin (2005) demonstrate that the decision to invest in CSR is negatively think to insider self-command, and interpret this finding in the light of an overinvestment hypothesis. CSR is good for shareholder value, up to a given level, but insiders may necessitate an interest to overinvest in it to improve their reputation, and they are more worryly to do so when their ownership share is lower.Literature ReviewThere is a growing rationalize for investors to direct their bullion towards explicitly socially responsible organizations. According to beak A. Heslin and Jenna D. Ochoa (2008) The amount invested in green mutual funds in the U.S. rosiness 695% in the last six twelvemonths. During the last three years, the amount of m integrityy invested in clean energy has reached U.S. $70.9 billion globally. The primary goal of some(prenominal) economy is to maximize the material wealth of nations (Adam Smith), production and distribution of wealth (John Stuart Mill), to maximize material wealth and material social welfare (Alfred Marshall), satisfaction of the gay needs with the scarce means (Lionel Robbins). But now a day, the impersonal of a firm is non only consistent with those scholars but withal incorporates social, ethical and environmental concerns. Therefor e the primary target area, the purpose or use for which, firms exist is to ensure the subsistence of mankind and sustenance of the Earth containing the mankind.Some authors pick up argued that the stakeholder perspective of CSR ought to extend to the concept of obligation. Drawing from the works of new(prenominal) academics (e.g. colour in et al. 1987 Williams 1987 Roberts and Scapens, 1985), Swift (200117) broadly describes accountability as the requirement or business to provide an account or justification for ones actions to whomever one is answerable and narrowly as world pertinent to contractual arrangements only, where accountability is not contractually bound there can be no act of accountability.According to Lantos (2001), ethical CSR is a firms mandatory fulfillment of economic, good and ethical responsibilities. It is akin to the first three components of Carrolls typology. Altruistic CSR is the same as philanthropic responsibility of Carrolls typology but differ ed from it in the sense that Lantos argued that it would only be possible for private firms to be philanthropic and irresponsibility on the part of public corporations since they do not control the rights to use the funds of shareholders (who ability also be involved in private philanthropy) for public philanthropy.As argued by Konz and Ryan (1999 200) People are searching for meaning in work that transcends mere economic exchanges between isolated, autonomous individuals. (and) a way to tie in their work lives with their spiritual lives, to work together in community, to be unite in a vision and purpose that goes far beyond make money.In modern era, business activities moving around the society visualizing sustainable development. It is not only a promotional activity but also an ethical dilemma. Some of the authors findings are given belowAuthorFindingsSethi (1975) corporate activities should be stable over time definitions of various categories should be relevant across fir ms, industries, or even social systems, making comparative abbreviation possible.Carroll (1991, 2004)CSR is made up of the following components in a bottom-up parliamentary law(1) economic responsibility be profitable(2) legal responsibility heed the law(3) ethical responsibility be ethical(4) philanthropic responsibility -be a good global corporate citizenLantos (2001)Identified the following strands of CSR(a) ethical CSR,(b) altruistic CSR and(c) strategic CSRCPD (December, 2002)Following issues have been identified under corporate responsibility framework-Sustainable DevelopmentBusiness Ethics man RightsLegal ComplianceCorporate GovernanceFair Employment health SafetyLabor StandardsCommunity Relations surroundingsal ResponsibilitiesObjectives of the StudyThe objective of the study is to investigate a definite structure and concept of Corporate Social Responsibility (CSR) in the area of banking sector. It deals with early history of corporate social responsibility, banking mission, and the area of social welfare. Besides these, it has some special objectives. These areTo get an idea of banking role in sustainable development.Evaluate transparentness and accountability of corporate as well as public entities.To nab business ethics, safety and ergonomic issues.To learn banks responsibility to community.To know prototype conduct that includes employment fair policy and all core dig standards.Methodology of the studyThe paper is constructed to synchronize theoretical and practical depiction of CSR in Banking perspective. As a result, the paper is descriptive in nature. virtually(prenominal) of the information are generated by evaluating Secondary Sources likeAnnual cut through of different commercial BanksStudy related books and journalsWeb sitesCollected information have then processed compiled with the aid of MS Word, Excel other related computer software. Necessary tables have been prepared on the creation of collected data and various stat istical techniques have been applied to analyses on the basis of classified information.Evaluation and FindingsIn Bangladesh, there are cardinal eight scheduled banks and out of them forty six had engagement in CSR practices in some form or other in 2009 (Review of CSR Initiative-2008-09). ascribable to intense competition in the banking sector, it is essential for a bank to deport in a responsible manner towards the society. This sense stimulates business activities in a long term and persistent social value. To attain this inalienable quality banks shouldFocus on vision based strategy (wealth maximization rather than profit maximization).Draw their attention to internal and external components of the CSR activities like fair salary structure, employee benefit, corporate governance, labor standards etc. They need to perpetrate their shareholder-customers, shareholders, employees and society. Behaving responsibility towards society and the environment strengthens this trust.The ir commitment has always been to behave ethically and to contribute towards changing the quality of life of their people, the local community and chiefly the society. Corporate social responsibility focuses onFigure 3.2 bowl of Social Responsibility maneuver PlaceEnvironmentMarket PlaceArea of CSRCommunitySource Annual Report of National Bank Ltd (2009)In 2004 and 2005, several banks adopted meticulous CSR policies to limit add related to unwholesome projects. The intense pressure from environmental activists and shareholders, different banks agreed to not pay projects in endangered or high conservation value forests or where illegal logging is occurring. Environmental concerns have grown steady during the former(prenominal) several decades. Goldman Sachs was the first global investment bank to adopt a comprehensive environmental policy. The natural environment is the major worldwide issue facing the business and the public. World concern continues to mount about the depletion of the Earths ozone level and the resulting green house effect, a dangerous warning of the Earth.In the year 2007, There is a greater concentration in the field of chance relief, both in participation and expenditure wise, was observed mainly because of the cyclone Sidr. Whereas, in the year 2009, the Education and Health sectors were getting more attention and appeared to be the most popular area for CSR activities as huge investments are being made by several banks in these segments. These shifts point to the responsiveness of the banking community to the changing need of the society.Despite progress made by umteen companies, adoption of CSR policies and reporting are still in its early stages at most corporations. Our Corporate Social Responsibility Program engages companies to adopt tender social and environmental policies, and follows us to ensure that commitments are kept.Corporate social responsibilities may provide added advantages to the business like as Balanced mict urate Card. Because pushing incentives in the base level (Work Place, Market Place, Community and Environment) ordain increase bottom line figure (Profit) of the statement. The positive attitude towards the focused element (Table-03) is the way of getting added advantages from the society.Major AreasFocused ElementAdded AdvantagesWork PlaceWorking EnvironmentEnhance employee satisfaction, confidence, productivity and loyaltyEmployee earnTrainingJob SecurityGender DiscriminationStaff welfareDay-care Center for children of bank employeeMarket PlaceCustomer Service pull ahead customer fidelity, and retentionNew ProductIntroduce new engineeringCommunityEducationSecure public confidence, interaction, positive attitude and devotionEmploymentSports Cultural ActivitiesHealth CareDisaster ReliefEnvironmentForestationAllure public attention through ethical bearing financial backing on eco-friendly firm(Financial Inclusion)Fig Added Advantages received by practicing CSRThe Financial secto r in turn can contribute hugely by catalyzing CSR practices in their real sector corporate clients, promoting inclusive economic and social development. In terms of direct monetary expenditure, engagements of banks in CSR initiatives are increasing, particularly following issuance of BB guidance (DOS Circular No 01 Dated 1st June 2008)CSR expenditures of banks have thus far largely been in the form of passive grants and donations. away from one-off grants and giveaways, some banks have engagements in longer term continuing support commitments, in areas of education and healthcare. Besides the passive engagements by way of grants/donations (Table 1, theatrical role B, page 2), banks are now getting actively engaged in socially responsible business operations, by way of increased lending to under-served economic sectors like agriculture and SMEs, towards fuller financial inclusion and speedy poverty eradication.The June 2008 BB Guidance circular suggested that banks could begin rep orting their CSR initiatives in a modest way as supplements to usual annual financial reports, at last to develop into full blown comprehensive reports in GRI format. Banks are in so far to adopt separate reporting of their CSR activities in comprehensive formats such as the GRI format.RecommendationsThe ultimate conclusion is that corporate responsibility is a changing ism of business. The demands for social responsibility have provoked enthusiastic discussion and dig on what new roles, if any, business firms should play in the social system. Banks should not attempt to minimize the expectations of the society rather they need to respond to them more efficiently. The corporate responsibility practices can play positive role in improving competitiveness in the corporate entities in Bangladesh as well as improve working and living environment for the workforce. Whether is for the government, the community, shareholders, directs, top commission, employees or the general public, a corporate organization that intends to effect changes in the environment must always perform a number of socially responsible actions.Formulate supply rules and regulations Government or regulatory bodies should formulate uniform rules and regulation regarding CSR practices in banking sector.Tax Shield All social office by the banks should be tax exempted. As a result, social contribution will increase gradually. stir corporate values In most of the cases, social contribution treated as enhance reputation only. But, they have to change their values and try to think its their responsibility too.Improving Business and Social Productivity A societys productivity depends on how efficiently it uses resources. If the by nature human and financial resources are combined and managed effectively by business forms then the productivity of both business and society can be high.Balancing Ethics and EconomicsA serious social take exception to business is to integrate ethics and economics. How much more profit is desired and what cost to the customers? What about product quality? Is the customer being cheated through poor measurement or abrasive advertisement? Ethical behavior and economics are the opposite sides of a bad coin. There should be a balance.ReferencesCarroll, A. B. (1991). The pyramid of corporate social responsibility Toward the moral management of organizational stakeholders. Business Horizons, 34(4)39-48Carroll, A. B. (1999). Corporate Social Responsibility Evolution of a Definitional Construct. Business Society, 38(3)268-295Carroll, A. B. (2004). Managing ethically with global stakeholders A present and future challenge. honorary society of Management Executive, 18(2)114-119Lantos, G. P. (2001). The boundaries of strategic corporate social responsibility. Journal of Consumer Marketing 18(7) 595-630Konz, G. N. P Ryan, F. X. (1999). Maintaining an organizational spirituality no easy task. Journal of Organizational Change Management, 12(3)200-210.Pete r A. Heslin and Jenna D. Ochoa , Understanding and developing strategic corporate social responsibility, Vol. 37, No. 2, pp. 125-144, 2008 www.sciencedirect.com