This chapter focuses on the term and significance of Corporate Social duty and what it entails, CSR policies used in developing states like Nigeria, assorted interest holders theories of CSR from legion school of ideas. Case surveies of transnational Oil companies like Shell Petroleum Development Company and a batch more in the Niger Delta part of Nigeria will be studied.
Corporate Social Responsibility can be viewed as an act which a concern administration in a certain geographical location undertakes in order to do the environment sustainable for the legion stakeholders who dwell within the said country. It can besides be described as when a concern administration decides to put in a societal responsible mode and becomes responsible to legion stakeholders around its administration.
Brown and Dacin ( 1997 ) define CSR as a company ‘s position and activities with regard to its sensed societal or at least stakeholder duties while another sentiment by Matten and Moon ( 2004 ) states that CSR is a bunch construct which overlaps with such constructs such as concern moralss, corporate philanthropic gift, corporate citizenship, sustainability and environmental duty.
Harmonizing to Porter M.E and Kramer M.R ( 2006 ) Corporate Social Responsibility has become a strategic constituent for many transnational corporations ( MNC ) today. Dahlsrud ( 2008 ) states that harmonizing to the Commission of the European Communities in 2001 Corporate Social Responsibility can be defined as a construct whereby companies integrate societal and environmental concerns in their concern operations and in their interaction with stakeholders on a voluntary footing.
Sjostrom and Welford ( 2009 ) unlike Dahlsrud provinces that CSR can be viewed as a medium when a company addresses society ‘s outlooks on environmental and societal dimensions of their operations such as pollution, labour conditions, energy ingestion etc. Many planetary concern administrations adopt CSR policies in their fiscal and operational processs in order to make a relationship with the societal, cultural and environmental system around them, because these systems tend to impact the manner of operandi of any concern, besides the ability to pull off these relationships is a immense undertaking that these concern administration have to manage with absolute attention and diplomatic negotiations.
Maignan et Al ( 2005 ) explains and defines CSR in a simplified mode saying that Corporate Social duty is a societal contract which requires and makes a concern administration to be committed and act in an ethical and responsible mode with the major end to understate the negative impacts and maximize the positive impacts on assorted jobs which are of import to the stakeholders involved. This explains the fact that that the major purpose of CSR is to eliminate all negative activities in an environment and hence identify and advance more positive activities in the same location.
Harmonizing to Michael B. ( 2003 ) CSR in developing societies such as Africa, Asia and South American communities can be classified into three classs of schools which are viz. the neoliberal school, state-led school and third-way school ; the neoliberal school focal points on self-regulation set by the industry of the said concern administration in understanding to the legion wagess and hazards of CSR activities, but it besides neglects to undertake the issue of misallocations of resources by an inadvertent effects of CSR activities while the state-led school focuses on international and national ordinances but overlooks the political relations behind authoritiess promoting CSR enterprises and the third-way school focal points on the functions of non-profit and net income administration but fails to turn to the involvement of participants involved in a CSR enterprise.
Lawrence and Weber ( 2008 ) argues that CSR entails an administration being responsible for any of its corporate actions which straight or indirectly affects its host communities and their environment every bit good, this implies that any injury caused to the people and their environment should be acknowledged and equal amendment processs should be created in order to forestall those harmful happening once more.
2.1.2 Stairss in Adopting CSR enterprises.
J.L Retolaza, M.Ruiz and L.San-Jose ( 2009 ) created a methodological analysis and form which can or should be used by concern administration seeking to follow and incorporate CSR into its organizational civilization and scheme. And this are chiefly classified into six major stairss which are: .
Designation of Potential Stakeholders, their outlooks and involvement: this is the first major measure a concern administration has to take in order to place unambiguously the involvement groups or stakeholders in its environment, and besides their outlook and involvement.
Describing and Interpreting Stakeholder ‘s outlook and involvement: this measure or stage involves has do with attempts to place the conflicting involvements of all the legion stakeholders involved, the concern administration would necessitate to develop a list to explicate in a elaborate mode the outlooks and involvement of each stakeholder and groups. After placing their legion outlooks and involvement the concern administration would necessitate to measure the importance of all those involvement and outlooks and set them on a tabular mode doing the most of import the last on the said table e.g. Marks set uping the different degrees of deduction scope from 1 to 10, where 1 shows the minimal involvement and 10 shows the maximal involvement.
Develop a in writing representation of stakeholders, outlook and involvement: this is the arrangement of the consequences gotten from the description and reading of stakeholder ‘s outlook and involvement in a graphical mode such as graphs, saloon charts and histogram for easy informations reading. By making this the concern administration can easy put a degree of importance to the involvement of stakeholders and besides place which involvement could be easy satisfied and besides of import.
Hierarchy of actions: At this point the concern administration would hold to do a comprehensive analysis of stakeholders and their expected involvements and outlook and puting them in a hierarchy harmonizing to their degree of importance, by making this the concern administration in future can turn to future actions to fulfill the identified outlooks and involvements.
Constitution of Social Compromises: this is the phase where the concern administration would find what societal understanding or via medias would be adopted inside the administration for different stakeholder ‘s and their involvement and outlooks. Numerous cardinal participants like the company ‘s managers would hold to specify the actions associating to CSR enterprises of the concern administration.
Integration of societal via media in the Management program of the Company: Empirical researches show that legion CSR attacks developed by different companies, the administration acquires some theoretical committednesss which could be described as a successful manner in relation to the political orientation of the concern administration. Harmonizing to Kaplan and Norton ( 2006 ) in the development of CSR, duty has to be considered as a critical component of strategic direction of the company hence it should be coordinated with the managerial attacks of the administration. The company or concern administration at this phase has to integrate CSR and utilize it has a strategic option which is aligned with company managerial programs and aims.
Arguments about Corporate Social Responsibility
Assorted sentiments and statements are ever generated when it comes to the term CSR, for case P.Dobers and M.Halme ( 2009 ) states that CSR does non merely concerns the relationship between houses and stakeholders involved but instead has a regulatory content which facilitates and addresses what responsibilities administrations might hold in our altering societal and economic environment. Business for Social Responsibility ( 2006 ) asserts that CSR should be regarded as when a company ‘s duty goes beyond return dividends and net income to stockholders but instead acknowledges its duties to a wide scope of stakeholders e.g. the environment and community of the company ‘s immediate operation.
But other bookmans such as Milton Friedman ( Steiner, 1971, Friedman 1962 ) do non back up the positions of P.Dobers and M.Halme ( 2009 ) , but argue that concern can non be “ responsible ” , merely the people can hold duties ; And this position point is surely against concern administrations following Corporate Social Responsibility. With his sentiment and point of view of CSR Friedman believed that a concern administration that spend money on charitable contributions or indulge in charitable undertakings, or effort to fulfill stakeholders other than the stockholders is surely misguided ( Jill Solomon 2007 ) . Corporate Administrations and their directors who run them would barely put to death or make CSR enterprises if it would cut down their cyberspace and gross net income but in recent old ages at that place has been a turning rate of literatures back uping the usage of Corporate Social Responsibility by Multinational corporations.
Tom Cannon ( 1994 ) provinces there are an inexplicit or expressed contract which exists between an administration and its operational community and besides a concern is expected to make wealth, invention and bring forth a degree of employment while lending its quota to the community in a societal responsible mode.
2.2 STAKEHOLDER ‘S Theory
A batch of literatures have been published on this theory and during the period covering the late 1970 ‘s to show, but this theory is being regarded as one of the of import theories which supports the incorporation of CSR activities within the operational construction of any administration. Situations associating with stakeholders both in a theoretical and practical mode are a bit different because in practical footings grounds and conceptual issues specific to the concern administration come into topographic point.
The stakeholder ‘s theory is used to incorporate stakeholder ‘s involvement and values into Corporate Social Responsibility initiatives, this theory farther provinces that stakeholders could be defined as a certain set of people who are being affected by the operational ends and aims of a corporation. Satisfying a certain figure of the countless involvements of stakeholders may better the fiscal and economic public presentation of a concern administration Freeman ( 1984 ) .
2.2.1 Relevance and Importance of the stakeholder ‘s theory to Corporate Social Responsibility
This theory ensures that corporate administrations should be encouraged by certain groups such as environmental force per unit area groups in order for them to favorably alter their behaviors towards stakeholders and besides be societal responsible in their actions. Harmonizing to Jill Solomon ( 2007 ) following the analytical model of the stakeholder ‘s theory the general populace can be viewed as corporate stakeholders due to the ground that they are taxpayers, thereby supplying the involved concern administrations necessary national substructure to run with.
B. Sholtens and Y Zhou ( 2008 ) states that hapless societal duty actions would impact an administration who wishes to obtain external finance such as immense loans and besides employ high skilled and motivated employees. Looking at this point of view we can see that hapless societal duty executing could do a high fiscal hazard to immense concern administrations such as oil companies and other transnational corporations ( MNCs ) .
Harmonizing to B. Sholtens and Y Zhou ( 2008 ) two hypotheses can be derived from the interest holder ‘s theory which are
There is a important association between fiscal return and stakeholder ‘s dealingss.
There is a important association between fiscal hazard and stakeholder ‘s dealingss.
The void consequence in the hypotheses can be noted as there is no relation between fiscal hazard and return besides between stakeholder ‘s strengths and concerns.
One major significance of the stakeholder ‘s theory is that it can non be stated as a normal traditional concern fiscal theories such as the Morden Portfolio Theory usually suggest and imply that there should be a nexus between fiscal hazard and return or wages but with the stakeholder ‘s theory it ‘s non the same, the stakeholder theory can be regarded as being managerial but its chief aim is associating stakeholder ‘s relation and fiscal public presentation.
Another major importance of CSR from a normative point of position stakeholder ‘s theory supports the impression that a concern should be able to command most of its resources and besides be responsible to both the stakeholders that affect their concern activities, stockholders and proprietors of the concern.
2.3 Outwardnesss Theory
Harmonizing to Kay-Yiu Wong ( 2000 ) Externality has a been an of import subject in economic sciences, and in the theory on international trade a batch of research and analysis has been done on closed and unfastened economic systems with outwardness. Besides he besides ascertained a definition which states an action creates outwardness if two conditions are fulfilled, the first status it affects the economic environment that other agents are confronting and the 2nd status is it is non to the full compensated or penalised for.
Outwardnesss or external effects are goods that have an impact on public assistance ( positive or negative ) that is non taken into history by the agent bring forthing them. ( Jan Horst Keppler ; 2007 ) .
Outwardnesss theory as a wide context, but it can be defined with this nomenclature ; outwardnesss are where certain production and ingestion of goods produced in medium or big graduated table have an impact on people instead than the makers or manufacturers of these goods and more frequently than non these impacts are ignored by the manufacturers. These impacts on these people are stated and categorised as side effects sustained by 3rd parties in that operational environment and therefore the house are supposed to bear some cost to counterbalance for this or debar these impact caused by their operations on the host communities, these cost are known to be external costs.
2.4.1 Types of Outwardnesss
Harmonizing to Nathaniel F. Edu and Patrick Onoriobe ( 2002 ) there are four types of outwardnesss and these are
Consumers on Manufacturers outwardnesss
Manufacturers on Manufacturers outwardnesss
Manufacturers on Consumers outwardnesss
Consumers on Consumers outwardnesss
2.4.2 Classs of Outwardnesss
Outwardnesss can be classified into two classs which are Positive and Negative outwardnesss as stated by James M Buchanan ( 2001 )
Positive outwardnesss: These are outwardnesss which occur during the operational activity of an administration but in this instance the impact on the people involved is a positive impact non a negative one and hence the people and steadfast both benefit from these outwardnesss.
Negative outwardnesss: Outwardnesss which occur in a certain environment and affects the people involved thereby holding an inauspicious consequence on them and the environment. The external effects of negative outwardnesss are known as cost on other people which can be called external cost and hence with this a expression can be derived which can be stated as
Private cost + External cost = Social responsible costs.
With the above expression derived from negative outwardnesss we can now see the relationship between outwardnesss and Corporate Social Responsibility, this expression can be used to analyze the degree of pollution caused in the Niger Delta by Oil and Gas companies and yet most of them neglect the external cost which make them non responsible in a societal mode for the unsought impact they have placed on the community.
It is noticeable that externalities occur in two sectors in a concern environment which can be identified as the populace and private sectors, and the lone manner of taking equal attention of those impacted by these outwardnesss in both sectors is by making a redress for both sectors in the said concern environment and this would be stated below
Redresss for Outwardnesss in the Public sector: assorted redresss have been created for this sector in peculiar and one of such steps is the creative activity of policies by the authorities which would assist the private sector develop the necessary markets. Harmonizing to Bernheim and Whinston ( 2008 ) assorted model measure controls and disciplinary revenue enhancements have different distributional deductions, but are regarded as every bit efficient. Besides in a underdeveloped society or state a redress which can be used is by the ordinance of activities of agents or manufacturers of outwardnesss but this redress is said to necessitate a great trade of information.
Redresss for Outwardnesss in the Private Sector ; outwardnesss in this sector are less detrimental than that of the populace sector, but a redress for this can be described as when private parties who produce outwardnesss should make equal solutions through the agencies of contract or through common ownership. Harmonizing to Bernheim and Whinston ( 2008 ) if bargaining is frictionless, so irrespective of how belongings rights are assigned, voluntary understandings between private parties will rectify the market failures associated with outwardnesss and reconstruct economic efficiency.
2.4 Overview of the Oil and Gas Industry in Nigeria
Harmonizing to M.J Ayotamuno et Al ( 2007 ) , the Oil and Gas industry began geographic expedition activities in 1903 when the Mineral Survey Company began its research in Nigeria. Later on in the twelvemonth 1958 Crude oil was discovered in a commercial measure in a small town in the Niger Delta part of Nigeria known as Oloibiri, which gave rise to the first cargo of Crude oil and its by merchandise to the European continent in 1963.
From the twelvemonth 1960 major Oil companies such as Mobil Oil Corporation now known as Exxon Mobil, Texaco Overseas and Chevron who finally merged together and became known as Chevron Texaco, Elf ( Satrap ) now known as Entire Fina Elf and Shell BP were involved in explorative activities in the Niger Delta part of Nigeria. With the entryway and outgrowth of the Oil Corporation in the Niger Delta part of Nigeria harmonizing to M.J Ayotamuno et Al ( 2007 ) , a sum of 1581 oil block or Wellss were developed. Out of the said figure of Wellss for 784 were drilled on land while 1,196 were drilled on swamps.
Oil and its by merchandises have become the pillar of Nigeria ‘s economic system and the province depends on Oil rents, revenue enhancements and royalties paid by legion Multinational Oil Corporations and besides on its equity bets in these Multinational Oil Corporation ‘s investings ( Kenneth Omeje ; 2005 ) .
The Upstream activities such as Oil boring, Gas geographic expedition, Field development etc. carried out by these Oil corporations are regarded to be their primary maps while the Downstream activities such as Transformation and refinement of Crude Oil merchandises into subsidies such as lubricators, air power fuel, motor oil etc ; operations of make fulling Stationss for the gross revenues of concluding crude oil merchandise like premium motor liquors ( PMS ) are regarded as secondary maps.
It is no uncertainty that the outgrowth of Oil in Nigeria in economic footings has made Nigeria one of the richest black states in Africa despite the high degree of corruptness practised in the state. The proportion of Oil gross to the Nigerian authorities rose from 26.3 per centum in 1970 to 81.1 per centum in 1980, decreased to 64.4 per centum in 1981, increased significantly to 86.2 per centum in 1992 and fluctuated between 68.3 per centum and 83.5 per centum in the twelvemonth 2000. In footings of GDP, the part of the Oil and Gas sector was 20.3 per centum in 1981, 13.6 per centum in 1986, 37.5 per centum in 1991, 46.8 per centum in 1992 and 47.5 per centum in 2000. ( Musa Jega Ibrahim ; 2006 ) .
Oil and Gas histories for more than 80 per centum of Nigeria ‘s foreign exchange net incomes boulder clay day of the month and hence devising it the mainstream of Nigeria ‘s economic system.
Looking at the current state of affairs of events, the inquiry which 1 should inquire is if the Nigerian authorities is making plenty to protect its citizens in the Niger Delta part from the ailment mannered intervention they receive has a consequence of the operations of the oil corporations down at that place. Harmonizing to Kenneth Omeje ( 2007 ) ; it is bickered that the rent seeking attack used by the authorities which is being driven to a pathological appendage causes the part to endure thereby giving the well being of the public of the community when doing policies and therefore giving much penchant to the involvement of international capitalist administrations