Organizational Performance Evidence from UAE Banking Sector Research Paper

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Corporate Social Responsibility Practices and Organizational Performance: Evidence from UAE Banking sector

LITERATURE REVIEW

Introduction:

The concept of Corporate Social Responsibility is not a new one. CSR has come to be corporate strategic responsibility in the sense that it is a significant component of corporate international business strategies (Isaksson, Kiessling, and Harvey, 2014). In the present day, CSR is acknowledged as having the potential for not only differentiation but also positioning within the global marketplace. Furthermore, it is deemed to be a pivotal implement for a firm’s longstanding legality and profitability. Since its inception, CSR has advanced to become a strategy employed by firms to facilitate value addition in their reputation (Isaksson et al., 2014). Global corporations are presently challenged with more intricate interrelations and diversified interests from various stakeholders. It is not sufficient to solely care for consumers and suppliers, but rather also the parties that can, may and will be impacted by the operations and marketing activities of a corporation. The inference of this is that corporations need to apply a more extensive, more holistic market strategy that goes beyond customary territories in order to accomplish corporate objectives in a better manner. This chapter encompasses a literature review of corporate social responsibility and organizational performance.

Corporate Social Responsibility Activities in the Banking Sector:

CSR has become a progressively more significant concern in the present day business world. Notably, it is a business viewpoint encompassing an extensive variety of elements such as environmental safety, human rights, and welfare of employees and other stakeholders. Its fundamental objective is to facilitate business sustainability and this impacts all industries including the banking industry. Wong and Wong (2015) assert that there is a significant positive correlation between CSR performance and financial performance in banking industry. In addition, in order for a banking institution to be socially responsible, it is imperative to establish a mentality of risk management, business ethics and CSR through internal management of personnel and processes. It also encompasses, comprehending intricate financial products and services through internal management of staff and processes and external management of economic circumstances for the benefit of stakeholders and lastly safeguarding the rights of consumers with instituting channels for consumers to address grievances (Wong and Wong, 2015).

Operative CSR Management Structure (H1)

The study undertaken by Choi, Lee and Park (2013) demonstrates that the business group affiliations together with the ownership structure of an organization are significant factors in ascertaining the managerial incentives to engage in corporate social responsibility. The authors indicate that a largely concentrated ownership permits for the controlling party to carry out stronger discretionary control over the resources of a firm. As a result, the incentive to utilize CSR to support entrenchment of the controlling owner or manager ought to be greater in organizations with concentrated ownership.

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On the other hand, if there is an efficacious system in position for observing management decisions, the controlling party will not be capable to disguise its unscrupulous behaviors using CSR (Choi et al., 2013).

Top management support for CSR activities (H2)

Support from top-level management facilitates effective implementation of CSR activities. According to Swanson (2008), managers play the role of driving organizations in the direction towards responsible or irresponsible corporate social performance. This is in the sense that top-level management can steer their corporations to adjust into or overlook social concerns, reliant on whether or not they take part in and motivate value-inclusive organizational decision making procedures. Aspects that impact the potential for responsible leadership within organization comprise of external control in terms of public policy and stakeholder pressure in addition to internal control that is put forth by board of directors. In particular, Swanson (2008) emphasizes that it does not imply that middle level managers or lower level managers are immaterial to CSR but it is simply owing to the reason that their decision making discretion is significantly demarcated by top managers.

Corporate Governance activities and CSR adoption (H3)

Corporate governance is the way in which corporations are controlled and in which those culpable for the direction of the firm are liable to the stakeholders of the firm. It related to the creation of longstanding relationships with both internal and external consumers. CSR reporting has come to be a fundamental part of corporate governance concern for social responsibilities. According to Sharif and Rashid (2015), it is largely challenging to make a distinction between corporate governance and CSR in the global economic standpoint. Essentially, corporate governance is centered on the ethical norms and accountability. On the other hand, CSR encompasses the prevailing business practices taking care of socially responsible matters. In this manner, there is a positive correlation between CSR and corporate governance. According to Young and Thyil (2014), governance systems and their interrelations with CSR are shown as fluid based on the national and institutional framework, economic circumstance and industry impact. Some of the factors that are significant to the integration of CSR into governance comprise of the economic environment, regulation, national culture, national governance system, and industry impacts.

Taking into consideration the increasing significance linked to both CSR and corporate governance, Chan, Watson, and Woodliff (2013) examine the correlation between these two mechanisms employed by….....

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