Corporate Social Responsibility and its Impact on Banks

This article explores the concept of Corporate Social Responsibility (CSR) and its impact on banks. It discusses the different CSR initiatives employed by banks, such as community-based activities and grassroots development. The article also evaluates the Payment Protection Insurance (PPI) incident in relation to CSR and its effects on banks. Additionally, it highlights the case of Liverpool Victoria as a model for promoting CSR. Overall, the article emphasizes the importance of CSR for banks and the positive impact it can have on society.

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CORPORATE SOCIAL RESPONSIBILITY
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Introduction
Corporate Social Responsibility is an organization’s intellect of responsibility to the
environment and community i.e. both societal and environmental, in which it operates. It’s the
mechanism through which corporate institutions in the economy accomplish their charitable
visions to the society. It’s a powerful tool of making sustainable competitive profit and attaining
long-term values for both stakeholder and shareholder.
The existence of the corporate social responsibility framework has led to the following
three models; the stakeholder theory, the business ethics theory and the shareholder value theory
of Corporate Social Responsibility. In the stakeholder theory, ethical and pragmatic as thought to
corporate success assumes large welfares of investors than the shareholder welfare, the theory
insists on special social rather than others not related to the organization. The business ethics
theory substantiates Corporate Social Responsibility on the following basis; changing and
developing responsiveness and anticipations, intrinsic ethical values, and corporate citizenship.
The theory sees Corporate Social Responsibility as more charitable and moral concern but not
legal and economic. In the shareholder value theory, Neoclassical economists argue that the role
of a corporate is doing legal business that leads to the growth of the society and economy and its
role in the society ought not be tangled with the social responsibilities carried out by
organizations who are not profit oriented, government band NGOs. Under this theory, it’s
believed that investors are the business managers and the stakeholders are their agents who have
the responsibility to serve the shareholders attention rather than any others (Brock, 2008, p.75).
Corporate social responsibility is progressively becoming one main part of the corporate
agenda for financial institutions (FIs). As argued by the different theories, every partner in the
system has its interest and wanted them given more or all the attention by the corporate. Balance

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for the interests of the stakeholders and shareholders have to be considered for smooth running
of business and a positive impact to the society. Banks are one of the components in the financial
sector and thus can be good companies to use as a case study.
Evaluation of CSR initiatives employed by banks
Recently, Barclays bank has invested in community based activities and grassroots
development largely valuing the potential in transforming lives through the sporting activities
(Morgan, 2013, p.251). Barclaycard Free Kicks by 2004 invested $1.5 million to fund football in
underprivileged communities, helping over 200000 children and giving them strong links with
football foundation. In 2004, the bank launched a program called Spaces for Sport. This is a
global grassroots sporting campaign that gives less privileged youths a room for positive values
of sport and earn a living from sporting. The strategies are now global and operate on 200
community centers in UK with over 53000 visits weekly (Steen, 2014, p.102)
The LLYODS banking group also has a direct impact in the economics status of the
society; it is one of the major employer and buyer of commodities and services from the society.
It’s one of the largest employers that is a private sector spending 4.4 billion Euros on salary and
5 billion Euros in purchasing goods and services from the society. The bank has a active
investment in the community, community charitable program and sports sponsorship (Genetay,
and Molyneux, 2016, p.77).
These banks have received a positive reputation, there was a good employee turnover and
there was increased customer satisfaction. These were attributed by the fact that the community
saw a payback from the banks. Involvements of these banks in addressing society problems had a
positive impact to the society and the banks themselves. It is thus important for the business

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institutions to chip in running various programs in the society, these means considering the needs
of the stakeholder in their area of operation.
Evaluation of where the PPI incident sits on CSR
Payment Protection insurance (PPI) is a protection invention that enables a consumer to
assure pay back of credits if the person borrowing passes away, falls sick or become disabled,
loses his/her job, or faced by any problem that may stop him from making an income (Barnard,
Francis, Hussain, Jumanca, and Zhang, 2018, p.23.). The selling of Payment Protection
Insurance has been a highly profitable venture to banks since it accumulated a lot of
commissions until the recent past when the claims were made by the customers. Payment
protection insurance was promoted based on payment with minimal concentration on the
compatibility of the commodity in the market (John, 2010). The insurance cover was meant to
stand as repayment cover on credit cards, loans and mortgages with most of the credit card and
loan companies selling these products simultaneously. By 2008, 20 million payment protection
policies were in existence in United Kingdom without some customers knowing they had it.
High profile firms selling Payment Protection Insurance have been recently charged by Financial
Conduct Authority for extensive mis-selling of Payment Protection Insurance; the fines will
adversely affect the profitability of the banks (Ashton, and Hudson, 2014, p.121).
Many banks have gone ahead to reduce the resources allocated to social community
developments as a result of reduced profitability after the fines. Basically the end outcome will
reduce the sponsorship, grants and opportunities given to the society by the banks as they try to
defend the shareholder interest and thus the stop of the developments run by the bank in the
society.

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Evaluation of Liverpool Victoria
Liverpool Victoria as an organization came up with a different view and influence in the
society, objectively their target was the poor members in the society whereby saving was a
primary objective (Isles, N., 2013, p.66). Savings for the funeral services was a good move since
in the poor always suffer much when they lose their persons and are always unable to raise funds
for funeral services. Transparency and customer preference were priorities to the organization
regardless of the profitability of the shareholders. Liverpool Victoria met their responsibilities
and obligations by fulfilling the stakeholder’s interests. As a result of change in demographic
patterns, Liverpool Victoria too changed its marketing strategy. The company has an excellent
relationship with the stakeholders.
Liverpool Victoria will facilitate the last rite of passage in live to its members, also the
family members has a clear path to claim the savings of this deceased. This shows that Liverpool
Victoria placed the stakeholders and society as a priority then the shareholders interests later.
The company has acted as a model to other companies in the society by promoting the
corporation social responsibility as a primary objective.
Conclusion
In summary, corporate social responsibility and the program run by Liverpool Victoria
are programs that ensure a constructive influence to the general public as the vulnerable people
in the society are given a chance. These projects will help in development of rural society and
thus even development in the economy.
From the case study and other life to life situations in the society, banks have done their
best to put an impact in every society. For instance Barclays bank plays a critical role in
sponsoring many sporting activities in UK. Also in African countries like Nairobi Kenya, the

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bank has a campaign on spread and stigmatization of HIV/AIDS, sponsoring environmental
activities and sponsoring education for the less endowed persons in the society.
The tradeoff between the stakeholder and shareholder interest has raised much debate
especially from the shareholders side who consider themselves the owners of the business and
the final decision makers for the business. Expectations of the society from the other side are too
high since they view these businesses as institutions that employ their resources to make huge
profits and thus they should get a share of the revenue through social development projects.
Recently these corporate organizations have realized the importance of considering the interest
of the shareholders in the society for boom and good reputation of their business. Currently
almost all if not all organizations consider the corporation social responsibility as compulsory
responsibility and thus have set out programs and campaigns in the society.
Generally, any organization owes a lot to the society they operate under, ranging from
social responsibility to economic growth. The stakeholders deserve a large proportion of the job
openings, environmental conservation projects, youth and women empowerment projects among
others are the expectations. When the stakeholders are involved, the will be positive impacts in
the growth and development of the organization since the society will feel as part of the
organization. There is thus a need to make the corporate social responsibility a mandatory for the
corporative.

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