ABSTRACT
This study seeks to ascertain and critically examine agency problem and corporate social Responsibility in Nigeria.
The objectives of the study are to establish the possibility of agency problems being reduced through creation or CSR commission; to examine the impact of agency problems on organization CSR in Nigeria and to examine the relationship between organization’s corporate social Responsibility and its’ financial performance.
The researcher used the primary data through the administration of questionnaires to sample respondents view and opinion on the subject matter. The results revealed that majority of the responses were in affirmative with the objectives of the study as shown by the descriptive statistics in chapter four.
T – test was used to test the hypotheses raised in the introductory chapter. The test of the hypotheses also affirmed the objectives of this study.
We concluded that there is a great need to resolve and reduce the agency problems in relation to corporate social responsibility in Nigeria so that the financial performance of corporate organization can be guaranteed.
CHAPTER ONE
INTRODUCTION
1.1 Background of The Study
For the past few decades, probably no issues has attracted and received more attention by business organization, politicians, government and the public at large than the issue of corporate social responsibility (CSR) and what the social responsibility of business is. Every business firm is linked with different interest group and which form the stakeholders of the business or firm. These stakeholders or interest group contribute to the growth and survival of the business and hence expected to be compensated through corporate social responsibilities.
Corporate social responsibility is usually integrated into a business model for an organization to be able to live in harmony with its operating environment. Corporate social responsibility policy functions as a built in self-regulation mechanism for a business entity to monitor and ensure its adherence to laws, ethical, standard, norms and nuances of its environment Prahated (2004), opined that CRS when proactively undertaken promote the public interest by encouraging community growth and development and by voluntarily eliminating practices that harm the public sphere, regardless of legality. Accordingly he averred that it is the inclusion of public interest into corporate decision making and honouring of a tripe bottom line known as people, planet and profit.
The global socio-economic climate has developed and emergent system, which responds to corporate and commercial necessities within a defined state or outside of it. The field of international corporate responsibility has assured an important sub-field of business ethics in response to increasing concerns about the ethics conflicts of international business. It includes business conduct, multinational enterprises, corporate responsibility and environmental issues in developing economies. The recurring demand is that multinational that site operating companies within communities outside their home base should not operate below the standards set by the authorities of their parent companies and should ordinarily have conducted research and investigation of the needs of the host communities (David, 2008). This goes beyond extending humanitarian assistance or establishment of resources centres in those communities.
The foregoing brings to the fore corporate social responsibility in Nigeria vis-à-vis the CSR bill before the National Assembly. The most active sector in Nigeria is the oil industry and it is where the Nigeria Government denies over 70 percent of its revenue. The Nigeria oil sector is dominated by big players such as shell, Chevron, Taxacom, Exxon, Mobil and Agip that have extended business interest across the seas into the Geographical confine of the country while the Nigerians state has a strong challenge of abuses of rights by multinational corporations over the year recent interventions by international advocating groups and the unrelenting strugglers of victims of the operations of these oil companies are making them to be more socially responsible (Peterson, 2005).
Many companies operating in Nigeria have at one time reported that they perform better in their responsibility to the society and that government should gather its loins to perform optimally (Vanguard, 2007). They contended that it is the failure of government to discharge its responsibilities that have made the various communities to be turning the heat on them. In the midst of the cacophonous buck passing a bill on corporate social responsibility is now before the National Assembly. The bill is for an Act to create the corporate social responsibility commission which will be charged with providing standards integration of social responsibility and international trade issue. The Bill seeks to establish a supervisory organ that will mandate corporations and companies to spend 3.5 percent of their profit before tax on CSR.
There is no doubt that Nigeria is in dive need to development, most of its public infrastructures is collapsing. The business entities are going under. Many companies are relocating to outside of Nigeria (punch 2009). With a array of graft agendas, it is expended by all interest groups and the public at large that corruptions and nepotism would be at their lowest ebb. But unfortunately, corruption, tribalism and electoral malpractices are systemic. So it is vital that the contributions of the growth of the society are encouraged (Anderson, 2009). However, the prospective and sensitive business climates of Nigeria currently does not permit companies to accede to the compulsory remittance of 3.5 percent of profit to the authorities for social development. It is contended that if companies are to contribute to the community it should be from the voluntary spirit of benevolence and philanthropy. In fact, many policy analysts are concerned about the extent to which a new CSR law would actually change lives in the communities in which the companies operate. Unless there is a radical regeneration of the society and a social rebirth, the law if passed and assented will soon become unrealistic (Ogah, 2009).
Basically the issue include the practicability and enforcement of such law the creation of another revenue for the corruption and has any others country put in place the type of CSR law Nigeria is contemplating. But it is also believed that such a law many detract from the real issues at hand since companies have practiced CSR for years but still, problems are rampant not only in the Niger-Delta but in every parts of the country caused by the different agency problems (Jones, 2010).
Most companies from time to time are affected with various agency problems prior to this bill on CRS sent to the National Assembly in Nigeria. These agency problem in terms of CSR have become a major cankerworm to many companies operating in Nigeria. It is against this backdrop that this study is undertaken by the student, researcher to ascertain the various agency problem militating against company’s CSR in Nigeria. This study also attempt to suggest a better way of reducing this agency problem can be comfortable and satisfied in profit maximization.
1.2 Statement of The Problem
Agency problem in terms of corporate social responsibility arises when the agent (managers) use the wealth meant for the principal (shareholders) to fulfill their CRS to the detriment of the principal. This obviously have a telling effect on the financial performance of the corporate organization in that substantial act of what supposed to be a return on equity is utilized to achieve the goal of CSR. Many factors are responsible for this. To ascertain the causes of these agency problems and the effects, the following research question have been raised in order to enable the researcher carry out the objective of this study.
1.3 Research Questions
1. To what extent does Environmental management affect the management of agency problems in Nigeria?
2. What is the effect of Community development on management of agency problems in Nigeria?
3. To what extent does employee relation affect management of agency problems in Nigeria?
1.4 Objectives of the Study
The main objective of this study is to assess the effect of CSR on managing agency problems in Nigeria. The specific objectives of the study are:
1. To examine the effect of Environmental management on managing agency problems in Nigeria.
2. To examine the effect of Community development on managing agency problems in Nigeria.
3. To determine the effect of Employee relation on managing agency problems in Nigeria.
1.5 Hypotheses of the Study
H01: Environmental management has no significant effect on managing agency problems in Nigeria
H02: Community development has no significant effect on managing agency problems in Nigeria.
1.6 Scope of The Study
This study is aimed at evaluating CSR and agency problem in Nigeria. It seeks to highlight the various agency problems bedeviling CSR of many local and multinational organizations in Nigeria as well as the solution to the problems. As such, it principal lay focuses on the impact of CSR of organization in Nigeria – Delta region of Nigeria as well as the agency problems affecting them. This study pays attention to stakeholders of some selected corporate organization and the general public within Benin City.
1.7 Significances of The Study
This study is aimed at addressing the agency problems militating against the discharge of corporate social responsibiliti4es by organizations in Nigeria. The study also attempts to uncover the various ways of reducing the agency problems in Nigeria. As such it will assist the establishment and government agencies to be abreast of these problems affecting them in detail in the discharged of CSR as well as the way out of it. It will be immense help to future researcher and in the academic field and other professions to know the causes, effects and the solution in the terms of the subject matter.
Finally, it is expected to depict the role of the government at reducing the agency problem affecting organizations in the discharge of their corporate social responsibilities with in the community they are situated or organization in Nigeria.
1.8 LIMITATIONS OF THE STUDY
There is no study undertaken by any researcher that is entirely perfect. As such this study may not be a perfect one. This is due to some constraints that may affect the student researcher in the cause of the study. These constraints are informed of finance cost, inadequate study material on agency problems in Nigeria and respondents response rate.
1.9 Definition of Basic terminologies
Corporate Social Responsibility (CSR): is a business process that a company adopts beyond its legal obligations in order to create added economic, social and environmental value to society and to minimize potential adverse effects from business activities, which includes interactions with suppliers, employees, consumers and communities in general. It also describes a company’s obligations to be accountable to all of its stakeholders in all its operations and activities. It is a concept describing a company’s obligations to be accountable to all of its stakeholders in all its operations and activities on a voluntary basis.
Social responsibility disclosure refers to the disclosure of information about companies’ interactions with society (Branco and Rodrigues, 2006). Due to informational asymmetry, disclosure of private information is imperative as it brings general gains in economic efficiency (Hossain and Reaz, 2007), and it is an important instrument in the dialog between business and society (Branco and Rodrigues, 2006). Generally transparency is an important aspect of good corporate governance practice and in relation to the mining firming sector.
1.10 Organization of study
The study is grouped into five chapters. This chapter being the first gives an introduction to the study. Chapter two gives a review of the related literature. Chapter three presents the research methodology; chapter four presents the data analysis as well as interpretation and discussion of the results. Chapter five gives a summary of findings and recommendations.
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===================================================================Item Type: Project Material | Size: 45 pages | Chapters: 1-5
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