Abstract
One of the points of debate on the role of corporate governance in financial institutions is corporate accountability. Corporate accountability is arguably attainable if corporate governance in financial institutions is appropriately regulated. While there is the question of the adequacy of regulatory standards and enforcement in challenging institutional context of the developing and emerging markets (DEMs), corporate social responsibility (CSR) can play a complementary role to regulation by public agencies. The concept of CSR may be distinguishable from corporate governance, the former can play a strategic role in the promotion of good corporate governance, particularly in the banking sector. Drawing on the institutional theory, this paper examines the connection between CSR and corporate governance. It identifies the difficulties of implementing global CSR models in the disconnection between the models and the institutional environment. The chapter argues that CSR models of developed economies cannot be adopted effectively in the DEMs due to institutional challenges. Using Nigeria as a case study, it suggests ways of incorporating CSR as a corporate governance mechanism for banking institutions in the DEMs. This limited regulated form of CSR will, in particular, include the adoption by regulators banking-specific CSR principles that are appropriate for the institutional contexts as part of banking regulation and supervision and multiple stakeholder implementation and enforcement of CSR standards. A limited regulated form of CSR can help to fill the corporate accountability gap in the banking institutions of some countries in the DEMs. In light of the above, CSR could be integrated into the corporate governance framework of banks in the DEMs by compelling banks to consider the interest of all its stakeholders. Banks are generally expected to conduct their businesses with transparency and integrity. Therefore, this chapter suggests that CSR policies implementation within the banking sectors should be the responsibility of the board of directors. There should be a mandatory requirement within the corporate governance framework for the board of directors to report on their economic, social and environmental activities and also of those of their supply chains. The chapter further proposes the idea of integrating CSR into the corporate governance of banks by linking executive pay to their performance on economic, social and environmental issues. It also suggests that one of the qualifications for the office of executive and non-executive directors’ banks would be to have some form of CSR training or and work-related CRS experience for at least for a period of 3 years.
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Notes
- 1.
Kenneth Amaeshi, Paul Nnodim, Onyeka Osuji, ‘Corporate Social Responsibility, Entrepreneurship, and Innovation’ (First Published 2013, Routledge Taylor & Francis, London) p. 7.
- 2.
M Gobbels, Reframing corporate social responsibility: The contemporary conception of fuzzy notion, Journal of Business Ethics, 44, 2002 p. 95–105.
- 3.
Tuan Nooriani Tuan Ismail, ‘Corporate social responsibility: The influence of the silver book’ International Journal of Business and Management Studies 3(2), 2011, p. 371–383.
- 4.
Howard Bowen, ‘Social Responsibilities of the Businessman’ (Harper, New York, 1953) p. 3.
- 5.
Milton Friedman, ‘The Social Responsibility of businesses is to increase its profit,’ The New York Times, 13 September 1970, p. 122–126.
- 6.
Andy Lockett, Jeremy Moon, Wayne Visser, ‘Corporate Social Responsibility in Management Research: Focus, Nature, Salience and Sources of Influence,’ Journal of Management Studies (2006) 43(1):115–136.
- 7.
Archie Carrol, ‘The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organisational Stakeholders’ Business Horizons, (July/August 1991) 34; 39–48.
- 8.
UN SD in Action Newsletter, September issue VOLUME 3, ISSUE 9, SEPTEMBER 2015 https://sustainabledevelopment.un.org/sdinaction/newsletter/september2015, accessed 29 November 2019.
- 9.
Jeffrey Sachs, Guido Schmidt-Traub, Christian Kroll, Guillaume Lafortune, Grayson Fuller, ‘Sustainable Development Report 2019.’ (New York Bertelsmann Stiftung and Sustainable Development Solutions Network 2019) p. 21.
- 10.
UN Helping Governments and Stakeholders make the SDGs a reality available at: https://sustainabledevelopment.un.org/#, accessed 29 November 2019.
- 11.
Ibid.
- 12.
Ibid.
- 13.
‘The UK Corporate Governance Code’ (Financial Reporting Council, London July 2018) p. 1.
- 14.
Adrian Cadbury, Report of the Committee on the Financial Aspects of Corporate Governance.
- 15.
Jean Tirole, ‘Corporate Governance’ Econometrica, Vol. 69, No. 1 (Jan. 2001), pp. 1–35. P4.
- 16.
Ruth Aguilera, Cynthia Williams, John M Conley, Deborah Rupp, ‘Corporate Governance and Social Responsibility: a comparative analysis of the UK and the US’. Corporate Governance: An International Review 25 April 2006, Vol 14, Issue 3, p. 147–158.
- 17.
Dima Jamali, Asem Safieddine, Myriam Rabbath, ‘Corporate Governance and Corporate Social Responsibility Synergies and interrelationships’ Corporate Governance: An International Review, 14 October 2008 Vol 16, Issue 5, p. 443–459.
- 18.
Nikolay Dentchev, Mitchell Van Balen, Elvira Haezendock, ‘On voluntarism and the role of governments in CSR: towards a contingency approach’, Business Ethics: A European Review, October 2015 Volume 24, Issue 4, p. 378–397.
- 19.
Christine Mallin, Corporate Governance, (6th ed Oxford University Press, Oxford 2019) p. 80.
- 20.
Adolf Berle, Gardiner Means, ‘The Modern Corporation and Private Property’ (1932 New York, Macmillan Co.) p. 66.
- 21.
Michael Jensen, William Meckling, ‘Theory of the firm: Managerial behaviour, agency costs, and ownership structure’. Journal of Financial Economics, 3: 305–360. 1976 p. 308.
- 22.
Kathleen Eisenhardt, ‘Agency Theory: An Assessment and Review’, Academy of Management Review, January 1989, Vol. 14, No. 1, p. 57–74.
- 23.
ibid.
- 24.
James Davis, David Schoorman, Lex Donaldson, ‘Towards a Stewardship Theory of Management Academy of Management Review’, January 1997, Vol. 22, No. 1, p. 20–47.
- 25.
Ibid.
- 26.
Ibid.
- 27.
Ibid.
- 28.
R Edward Freeman, ‘Strategic Management: A Stakeholder Approach’ (Pitman, Boston MA 1984) p. 46.
- 29.
Ibid.
- 30.
Sheila Puffer, Daniel McCarthy, ‘Institutional Theory’ Wiley Encyclopaedia of Management January 2015, Vol. 6 International Management.
- 31.
Ibid.
- 32.
Richard Scott, The Adolescence of Institutional Theory, Administrative Science Quarterly December 1987 Vol. 32, No. 4 pp. 493–511, p 498.
- 33.
Paul Dimaggio, Walter Powell, ‘The iron cage revisited: Institutional isomorphism and collective rationality in organisational fields’, April 1983, America Sociological Review, Vol. 48, pp. 147–160.
- 34.
Ibid.
- 35.
Ibid.
- 36.
Ibid.
- 37.
CBN has listed the number of commercial banks on its website to be 23, however, following the recent merger of Access Bank Plc and Diamond, the total number of commercial banks in Nigeria as it stands told is 22. See List of Financial Institution: Commercial Bank, available at: https://www.cbn.gov.ng/Supervision/Inst-DM.asp, accessed 29 November 2019.
- 38.
Sustainability Report 2017 available at: https://www.zenithbank.com/Sustainability_Report_2017/index.html#p=103, accessed on 29 November 2019.
- 39.
Ibid.
- 40.
Access Bank, ten years of leading sustainability available at: https://www.accessbankplc.com/AccessBankGroup/media/Documents/Sustainable%20Reports/sustainability-report-2017.pdf, accessed 29 November 2019.
- 41.
GTBank CSR report 2017 available at: https://www.gtbank.com/uploads/csr-reports/2017-report/CSRReport_2017.pdf, accessed 29 November 2019.
- 42.
GTBank CSR report 2018 available at: https://www.gtbank.com/uploads/csr-reports/2018-report/GTBank2018_CSRReport.pdf, accessed 29 November 2019.
- 43.
About UBA Foundation, available at: https://www.ubagroup.com/uba-foundation/, accessed on 29 November 2019.
- 44.
UBA Annual Report 2018 see, https://www.ubagroup.com/nigeria/wp-content/uploads/sites/3/2019/03/UBA_Plc_2018_Annual_Reports_and_Accounts_NSE_15-March-2019.pdf?x69983, accessed 29 November 2019.
- 45.
‘Executive Order 7, CSR and the duty of government’ Business Day Nigeria 5 Feb 2019, p. 12.
- 46.
Theophilus Onojeghen, ‘Illegal Deductions: CBN return N65bn to bank customers,’ The Punch 19 July 2019, available at: https://punchng.com/illegal-deductions-cbn-returns-n65bn-to-bank-customers/, accessed 29 November 2019.
- 47.
Aderemi Ojekunle, ‘CBN pushes commercial banks into a tight corner with new lending policy,’ Business Insider by Pulse 4 July 2019 available at: https://www.pulse.ng/bi/finance/cbn-pushes-commercial-banks-into-a-tight-corner-with-new-lending-policy/cx3gye1, accessed 29 November 2019.
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Ediagbonya, V. (2020). Incorporating CSR in Corporate Governance of Banking Institutions in a Challenging Institutional Context: A Case Study of Nigeria. In: Crowther, D., Seifi, S. (eds) Governance and Sustainability. Approaches to Global Sustainability, Markets, and Governance. Springer, Singapore. https://doi.org/10.1007/978-981-15-6370-6_2
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