CSR practices in the banking sector: A normative view

It is undoubtedly a reality that a firm's financial performance is not sufficient for enhancing its effectiveness in today's highly competitive business world. As an ornament of sound corporate governance, the term 'CSR' (Corporate Social Responsibility) has, in the recent times, penetrated through some businesses of Bangladesh in general and the banking sector in particular. Bangladesh Bank issued a circular in June 2008, asking banks operating in the country to voluntarily undertake CSR initiatives and report thereon apart from routine financial reporting. Bangladesh Bank, as part of its scheduled monitoring, has published the first Annual Review of Corporate Social Responsibility (CSR) Practices in the financial sector. Let us have a glimpse at the highlights of the review: Banks' perceptions of CSR Out of 48, 32 scheduled banks inserted CSR statements in their annual reports. An insight into the statements pinpoints the CSR perceptions held by reporting banks as follows:- Defining CSR: Bangladesh Bank's views Bangladesh Bank has spelt out its views in its 2008 circular. Bangladesh Bank views that CSR entails(i) taking stock of the economic, social, and environmental impacts of a business, (ii) mitigating the negative impacts and bolstering the benign impacts, (iii) taking up action programs and community investments to reduce social exclusion and inequality and to address the key sustainable development challenges. Banks may adopt CSR initiatives in priority areas like creation of self-employment, SME lending, waste recycling, effective treatment plants, biogas plants. smallholder financing, remittance facilities to remote rural households and financing programs for arts, crafts and tourism, etc. A critical analysis of CSR and its practices in banking That the banks are now spending for several philanthropic activities and coping with disasters is of great benefit to the various segments of the needy and disadvantaged population. Their transparency and accountability have also increased to the some extent. The people have had a positive image of the CSR performers. As revealed by BB Annual Review, banks' funding for social activities is not a one-off programme, rather a continuing one. Triggered by the pressure of competition and globalisation, foreign elite corporates pioneered CSR practices in order to pursue societal marketing philosophy for gaining social reputation and restoring the corporate image stigmatised by increasing emphasis on profiteering motives. We have had to formally adopt the concept of CSR from abroad to practice in our own businesses. The fact is that the current perceptions of CSR have been conceptually perverted despite beneficial effects of the practices. However, it is a golden opportunity for us to reap the benefits of the CSR practice if we can indigenise and redefine the concept recognising the real relationship between a business and the society for the noble end of safeguarding the interests and needs of the broad mix of organic stakeholders of any business. We can just substitute corporate stakeholder responsibility for corporate social responsibility with the abbreviated form CSR. Thus the focal point would now be Stakeholders as they are in symbiotic relationship with a bank. Corporate social responsibility paradigm is based on the assumption that a business is by birth alienated from the society. In contrast, nobody can ignore the truth that the business of a bank cannot operate without the contribution and cooperation of several groups of people or individuals such as stockholders/ owners, management, employees, depositors, borrowers, suppliers, creditors, service providers, the government, regulatory agencies, tax authority, the community. Of course, there are diametrically opposite two groups of people, one agreeing with the truth on principle only and being interested to implement in a conventional paradigm while the other agreeing on principle but lacking interest to implement in no way. CSR is an important criteria to evaluate organisational performance, but the current framework cannot provide a bonafide yardstick. There are several approaches to judging the effectiveness of a bank's overall performance. In the present competitive business world, it is of utmost justification to judge the organisational effectiveness of a bank by the extent to which the bank is able to minimally satisfy the expectations of each stakeholder group in a balanced and holistic manner. This is known as stakeholder approach to organisational effectiveness assessment. Obviously the stakeholders have specific expectations from the bank. These are grossly identified below and not an all-exhaustive one: A bank is a coalition of several stakeholders. It must have a sense of what is right or wrong and has no right to exploit stakeholders, deceive them and deprive them of rights and privileges. A stakeholder framework is based on the true meaning of business functioning and ethical considerations and obligations. Current CSR practices are just piecemeal endeavors and not underpinned by a holistically constructed framework. Banks' perceptions are that CSR refers to just spending for welfare activities of the disadvantaged people and sponsoring activities that attract the community. It is also observed that a few routine and essential programmes are also included in CSR practices. The current CSR practices are included in the stakeholder framework, but do not or, most arguably, cannot constitute the whole body of stakeholders' expectations matrix, rather they are to be labelled as an add-on responsibility instead of inbred responsibility. A bank is required to focus on the fulfillment of the expectations of each category of stakeholders. Let us change our mindset to refine the existing and imported views as well as practices of CSR (corporate social responsibility) with the multiple-stakeholder model. It is expected to bring about a revolution in the realm of corporate governance. ......................................................... The writer, a Ph.D Fellow, can be contacted at: hskr102001@yahoo.com