Excerpt
In a contemporary competitive market, the correlation between corporate social responsibility (CSR) and profitability cannot be overemphasised. Multinational companies gain economic and competitive advantage by active involvement in social responsible programs and good ethical practices. This essay analyses the level of impact of CSR activities in the telecommunication sector of Nigeria using different established theoretical views and approaches. Also, the adverse effects of the telecom operator’s business operation on the environment are delineated. An approach is recommended for the telecom operators to foster a common interest of all stakeholders in the industry.
A publication by Bowen’s Social Responsibility of Businessmen in 1953 initiated the phrase “Corporate Social Responsibility”, and suggested business activities have a wider sphere of influence beside mere profit-seeking. The history of social and environmental concerns about business is as old as trade and business (Brass Centre, 2007). With industrialisation and globalisation, the concept has proliferated by a myriad of debates and a paradigm shift in terminology from social and environmental concerns of business behaviour to CSR. Figure 1 in appendix shows the evolution sequence of CSR research.
According to a new definition of CSR proposed by the European Commission (2001), companies should have in place a process to integrate social, environmental, ethical, and consumer concerns into their corporate structure and core strategy beyond the obligations of the law. It involves giving back to society some of the gains and benefits realised by a company’s activities which bolsters a symbiotic relationship between corporate organisations and the society at large.
In Nigeria, CSR is a contemporary and contextual practise aimed at addressing the socio-economic challenges of all stakeholders in the society. The Federal Executive Council (FEC) on May 21, 2008 approved the development of a CSR Policy for the country to instil corporate ethical behaviour in Nigeria business practises (Adeyanju, 2012). The policy was initiated amidst widespread public awareness and outcry of fragrant pollution of the environment especially by oil companies in the Niger Delta region of the nation where corporations exploited the local communities for wealth maximisation and profitability.
The influence of the telecommunication sector involvement in corporate social responsibility since the deregulation of the industry and issuance of license to some operators is minimal compared to the large wealth amassed by the investors. With over 120 million mobile subscribers, the major telecommunication operators; MTN, GLOBACOM, ETISALAT, and AIRTEL (See Appendix) try to increase their customer base by bogus advertisements and promotions. For example, MTN Ultimate Wonder promo gave an opportunity for customers to win weekly cash prices while the ultimate winner went home with the cash equivalent of a Cessana 182T airplane (Adeniyi, 2013).
Baker (2004) noted that CSR is about how companies manage the business processes to produce an overall positive impact on the society. The word ‘society’ is broad and multifarious in this context. Since companies cannot meet the overall expectations of the society, specific strategic domains of stakeholders are usually selected.
Who are the stakeholders in the telecommunication sector? The stakeholder theory of a firm will give us a firm foundation to decipher the meaning of the term ‘stakeholder’. A stakeholder approach by Freeman defines the term as “any group or individual who can affect or is affected by the achievement of the organisation’s objectives” (Freeman 1984, p. 32; Crane & Matten 2010, p. 61). Hence, the stakeholders for the telecommunication sector are the environment, employee, customers (mobile subscribers), shareholders (owners), competitors, local communities and government.
From a legal perspective, corporations have a fiduciary responsibility to the shareholders who hold a legitimate stake. However, stakeholder management is not limited to shareholders interest but integrating all stakeholders in a firm’s decision-making processes. Friedman’s (1970) view differs from this stakeholder management approach. He pointed out that the only one responsibility of business towards society is the maximisation of profits to the shareholders within the legal framework and the ethical custom of the country. Contemporary researchers have concluded that there is a strong positive correlation between profit maximisation and corporate social responsibility in all segments of business operations (Griffin and Mahon, 1997; Crane and Matten ,2010; McWilliams and Siegel, 2001).
Studies have proposed the relationship between the business size of a company and its voluntary involvement in CSR. Larger companies tend to be more socially responsible than small ones because of several factors including the financial capital, access to resources and economics of scale (Grigoris& Nikolaos, 2011). For Instance, MTN Nigeria licensed in 2001, established a CSR Policy and foundation in 2004 (See Appendix). It is evident that MTN’s CSR activities have a larger penetration in comparison to GLO the second largest subscriber base telecom operator in Nigeria. In addition, Matten and Moon (2004) proposed an ‘implicit’ and ‘explicit’ framework to understanding CSR. The Nigeria corporate governance approach is best exemplified by the explicit CSR framework where companies have voluntary corporate policies towards social responsibility. In contrast, implicit CSR practised in European countries embed CSR stakeholder’s interest in the legal and institutional framework of the business society (Crane& Matten, 2010).
Garriga and Mele (2004) classified the relevant CSR theories into four interrelated dimensions; profit maximisation (Instrumental theories), business power (Political theories), meeting social demands (Integrative theories) and value responsibility (Ethical theories).
Nigerian telecom companies primarily focus on the instrumentation segment with little emphasis on social and ethical values. The major concern of GSM operators is to achieve short and long-term financial economic benefits through advertisements, promotions and dubious allegations of better quality of service, reachability and connectivity to increase their customer base, shareholder value and strategic competitive advantage over other competitors with minute obligation to meet social responsibility demand of the society. For instance, the MTN Group (Worldwide) profit after tax for 2010 showed that the West Africa operations, mainly consisting of Nigeria and Ghana contributed 71% of the group’s profit after tax of N377 billion ($2.51billion). Market analysts claim Nigeria contributes about 70% of MTN Group West Africa profit after tax, which is estimated as high as N188billion, making it one of the most profitable companies in Nigeria( Brown, 2011). In spite of the colossal profits, the company contributes only 1% to corporate social responsibility through its foundation in Nigeria.
An all-inclusive analysis of the CSR activities in Nigeria’s telecommunication industry will be delineated by Carroll’s model of corporate social responsibility. The widely accepted and quoted multi-layered model is referred to as the Carroll’s Pyramid of CSR. Carroll and Buchholtz (2009) define CSR as “the economic, legal, ethical and philanthropic expectations placed on organisations by society at a given point in time” (Crane& Matten, 2010). In ascending order of preference, the economic responsibility is the bedrock and most important layer. It includes high return on investments for shareholders and maintaining a strong competitive advantage in the industry. From its legal perspective, businesses obey the law and play by the rules of the game. The obligation to do what is right, just and fair; avoid harm is the ethical standpoint. The final responsibility refers to philanthropic acts and charitable contribution in other to improve the quality of life in the local communities and society at large.
In the African context, economic responsibility has the highest preference on the ladder and is closely followed by philanthropic; next is the legal while the ethical responsibility is in the bottom of the ladder (Visser 2006).
In the telecommunication industry of Nigeria, the economic responsibility of the mobile operators cut across the stakeholders in the society. The shareholders demand high return on investment and consistent profitability; employees bargain for high remuneration and a safe working condition. The experienced and skilled employees have higher prospects over the inexperienced new graduates as they jump at a better offer from other telecom operators. Mobile subscribers, the most important stakeholder domain, demand good quality of service (QoS) at a fair price. There is intense rivalry among the operators for price reduction. For example, in the early phase of GSM operation in the country, the major GSM operators (MTN, Econet) insisted that per second billing (PSB) was not possible and so consumers paid huge amount for calls and were exploited. However, when GLO entered the industry and started PSB as a competitive advantage, other operators quickly followed suit to retain their mobile subscriber base. Also, the Nigerian government’s economic benefits include revenue from taxes and levies, market expansion and an increase employment rate. The telecommunication industry is the fourth highest contributor (5.71%) to the Gross Domestic Product (GDP) of the country (Nigeria Bureau of Statistics, 2011).
On legal responsibility, the independent Nigeria regulatory agency (NCC), proposes and implements rules, laws and standards to protect rights and interest of customers against unfair practises by telecommunication operators. There have been widespread complaints by subscribers on sharp practises, infringe on subscribers privacy and illegal deductions in the industry. To address some of these issues, the commission (NCC) in 2011 embarked on a comprehensive SIM card registration to develop a central database system of all telecom subscribers to curb nefarious crimes such as money laundering (419), theft and kidnapping exploited by unscrupulous individuals. The data registration has assisted security agents track down crime and illegal fraudulent activities in the country.
Furthermore, the commission banned all telecom operators from engaging in promotions and lotteries after several criticisms from consumers and industry stakeholders. The anti-competitive practises were focused to increase their subscriber base and profitability. Although the operators claim the promos are aimed at rewarding brand loyalty, but stakeholders believe the activities are shenanigan money making mechanism for the telecom operators and contribute to poor quality of service.
The ethical responsibility focuses on good corporate governance and corporate accountability. Lohman and Steinholtz (2004) posited CSR as a “combination of three separate agendas namely: sustainability, corporate accountability and corporate governance” (Adeyanju, 2012). Corporate governance deals with the organisation’s ability to manage resources credibly while corporate governance deals with the manner an organisation is run with transparency and trust (Osemene, 2012).
The ethical issue revolves around corruption and bribery which cuts across all sectors of the economy. Although, most of the telecom operators have an established “code of ethical conduct” on their company websites rejecting bribes, illegitimate favours and so on, but actual practices prove otherwise. They indulge in such unethical practices to gain competitive advantage, favour company policies and management quest for profits. Sikka (2010) refutes such practices by arguing that the policy of ethical conduct does not stymie the systematic pressures to produce ever rising profits and gaining competitive advantage.
For example, Siemens AG was involved in lobbying of government officials to secure telecommunication contracts in Nigeria Telecommunication Limited (NITEL) and Ministry of Communication. The company was charged with embezzlement and financial misconduct of approximately $12.7 million in suspicious payments to top government officials in connection with Nigeria contracts (US District Court of the District of Columbia, 2008, p.20). These practises are in discordance with the company’s ‘code of conduct’ to conduct business responsibly and in compliance with the legal requirements of the countries in which it operates and guide decision making processes in an ethical law-abiding manner (Otusanya, 2012).
Lord (2000) postulated that lobbying has become a prevalent form of corporate political action. GSM operators employ persuasive lobbying to influence government stakeholders and regulators on policy-making decisions that does favour their business activities to the detriment of the customers in the nation. The operators provide perks, free call airtime and sponsorship to government officials and their families in return for lenient legislation and high profit making atmosphere for their operations.
In Kant’s ethical perspective of duties, the stakeholders should not be treated only as a means but always as an end (Crane & Matten, 2010). The employee and mobile customer should have a sphere of influence in decision making process within an organisation. Donaldson and Preston (1995) posited that the interest of all stakeholders are of “intrinsic” value, each stakeholder merits consideration for its own sake and not merely to further the interest of only the shareholders. The GSM operator’s goals should be closely aligned with that of the employee, customers and society instead of purely to gain financial advantage.
In Nigeria, the philanthropic responsibility has the second highest priority in Carroll’s pyramid model of CSR. The socio-economic needs of the poverty-stricken society are beyond the capacity of the government. Telecom operators contribute resources to the community and improve quality of life of the society in accordance with the limited view of corporate citizenship which is equated with corporate philanthropy (Crane & Matten, 2010).
In the industry, philanthropy has gone beyond charity and donations to strong alliance with non-governmental agencies, civil groups and public sectors to address health, education, disaster relief materials and economic empowerment of youths. For example, MTN Nigeria initiated a foundation in 2004 to cater for CSR initiatives, GLO Nigeria has sponsored the Nigeria premier football league since 2003 and biggest supporter of sports in Africa, while Etisalat Nigeria has supported the society through scholarships, skill capacity training and health (See Table 1 in appendix for detailed list). Although the philanthropic initiatives of the telecom operators are laudable, multinational telecom companies in developed countries are shifting from the limited view to the extended view of corporate citizen as a new framework for corporate social responsibility.
The Carroll’s CSR pyramid model has two main limitations; the inadequacies in addressing conflicts and contradiction of responsibilities depicted in the layered structure. A typical example is a recent relocation of Airtel’s customer service centre from Abuja to Ibadan (race to the bottom), a less expensive region and subsequent 50% slashing of employee salaries generated a lot of uproar in the industry. How to reconcile the economic benefit in terms of cost savings and profitability with ethical responsibility to provide fair wages and secure working condition remains unresolvable.
More importantly, the model omits the influence of corporate company’s activities on environmental or ecological management and “the environment as a stakeholder”. The environment is sometimes identified as a ‘stakeholder’, but who acts or speaks on interest and concerns on behalf of the ‘stakeholder’ prompts an issue (Nada & Cecile, 2005). Companies need to take proactive measures and initiatives to protect health, safety and the environment of the local communities in which the business operates irrespective of the policies implemented by the government.
[...]