Lloyd Bank's Approach to CSR - Term Paper Example

1. Introduction Corporations should be socially responsible primarily because businesses are intrinsically linked to people and their welfare should be intrinsic part of their business strategy. The fast changing social values and rapid globalization has made developmental issues a highly relevant field and an intrinsic part of the socio-economic development of the society. Accountability in their actions has become one of the most crucial aspects of modern behavioural pattern. In the recent times, the scope of accountability has widened to include the emerging new paradigms of changing social values and issues which have significant impact on the overall socio-economic development of the society. Indeed, the highly competitive nature of emerging new models of global business has increased the risks and responsibilities of the organizations and made it imperative for them to become proactive participants in the development of society at large. ‘The relationship between companies and civil society organizations has moved on from paternalistic philanthropy to a re-examination of the roles, rights and responsibilities of business in society (UNIDO, 2002). This becomes all the more important for organizations like banking industry that are intrinsically linked with the requirements of the people and significantly impact large strata of society. The banks have become integral part of development processes of the nation and accountable to their various stakeholders. The paper would be looking at the various aspects of corporate social responsibility and studying the CSR policies and activities of Lloyds Banking Group to evaluate its role and performance vis-à-vis CSR. 2. Lloyd Bank and Strategic goals Lloyds Banking Group has become the largest retail bank in UK after the acquisition of HBOS in January 2009 (lloydsbank.com). The bank’s vision and mission are focused on becoming the best financial institution and build long lasting relationship with its customers. The bank’s operations are widely distributed to encompass facilitate and manage financial services for its stakeholders, insurance and mortgage etc. Since they serve more than thirty million customers, their proactive participation in the social development becomes an essential business strategy. 3. What is CSR Corporate social responsibility (CSR) is a relatively new concept that is becoming increasing more popular among the multinationals and big corporate houses which have significant presence in a developing countries or are intending to enter the emerging market of developing economies. According to UNIDO, ‘Corporate Social Responsibility (CSR), defined in terms of the responsiveness of businesses to stakeholders’ legal, ethical, social and environmental expectations, is one outcome of these developments’ (UNIDO, 2002). Some scholars assert that CSR is a ‘social investing’ built for the purpose for creating ‘social capital that helps to improve and improvise the economic performance of the corporation (Waddock, 2001; Habish, Meister & Schmedpeter 2001). Thus CSR broadly aims at organization’s attempt to proactively participate in the community development processes and promote sustainable development through delivery mechanism of its strategic goals and objectives. 4. Ethical consideration and CSR imperatives for Lloyds Bank The demands of the contemporary business compulsions make it necessary for the bank to adopt social development within its business strategy to gain competitive advantage in the industry. Indeed, the moral and ethical considerations within its operation become hugely relevant. Kant discusses the ethical obligation and has espoused the concept of categorical imperatives that have universal appeal and authenticity because they are founded on the rationality that govern our actions. Onora O’Neill has interpreted this as ‘Always treat humanity, whether in your own person or that of another, never simply as a means but always at the same time as an end’ (Neill, 1975). Bentham’s Utilitarianism also encourages people and organizations to perform actions based on the consequences that are good (Bentham from Rosenstand p.176). These are very important interpretations with regard to banks and banking facilities. According to it, persons are not just a means to an end but they must be considered as an end so that a healthy mutual respect can be developed between the two, resulting in long term relationships that are mutually beneficial. Hence, whichever theory is applied to the bank’s operations and policies, the outcome calls for ethically delivered practices and welfare actions for its various stakeholders. Thus, effective CSR policies become important leverages for the bank 5. Stakeholders of the banks The stakeholders are the individuals and groups affected by the outcome of a decision. The following map of stakeholders amply demonstrates the wide range of people who are influenced by business’ decisions. Hence the various stakeholders of the bank are its customers, shareholders, workforce and network of organizations that facilitate its various operations. The following stakeholders map clearly elaborates the various elements that are intrinsic part of the banking decision making processes. 6. Models of CSR Meehan, Meehan & Richards (2006) have emphasized the need for effective CSR because business goals and the needs of the society are intrinsically linked. The 3C-SR model is important because it demonstrates the need for CSR in business strategy. It encapsulates various models which can be described below: 6(b) Caroll’s pyramid of CSR Caroll’s pyramid of social responsibilities of the corporate world is highly relevant. It argues that the hierarchical distribution of responsibilities comprising of economic and legal parameters must also include social welfare of the people at large that is focused on the ethical and philanthropic considerations (1979). 6(c) Corporate social performance Wood (1991) believes that organizations’ CSR strategy must incorporate the performance and corporate behaviour vis-à-vis its social responsiveness to the development processes. It integrates the various elements of business paradigms for collective outcome that are socially relevant. The model becomes a critical part of contemporary business because it tends to identify areas, evolved due to fast transforming environmental factors, and develop appropriate responses for optimal performance outcome. Thus, it promotes CSR as vital opportunities for organizations to improve their credibility amongst the various stakeholders and thereby improve its performance. 6(d) Corporate Citizenship This is a relatively new concept that is significantly impacted by emerging new model of global business dynamics that has to meet the challenges of geographical boundaries and pluralistic societies in the diverse socio-political environment. Matten & Crane (2005, p171) assert that in the era of rapid globalization, ‘corporation’ and ‘citizenship’ jointly redefine newly transformed socio-economic and political imperatives that go beyond the individual interests of the nations. Waddock (2004) is of the view that corporate citizenship has wider ramifications on the operations and performance of the organizations that are spread across the globe. While environmental factors become crucial to identify and exploit market opportunities for greater economic gain, CC helps to overcome the elements of non market factors. Baron () has defined non market factors as ‘4Is: issues, institutions, interests and information’. Non market factors, in emerging markets become all the more crucial because of the sensitive nature of the new market potential and the volatility of the market forces. The socio-political environment coupled with the media and public opinion are become vital factors for the stakeholders interests. 7. Lloyd Bank’s approach to CSR Lloyds Bank’s approach to CSR is very interesting because its different aspects of corporate governance have become intrinsic part of CSR strategy. Its CSR paradigms broadly integrate Caroll’s pyramid of CSR and Wood’s social performance criteria. While ensuring that the welfare of its workforce is an important factor for the managerial leadership, it primarily contributes towards social development through the following three ways: 7(a) Becoming facilitator in UK’s economic recovery The bank has become a major facilitator in the rebuilding process of UK’s economy. It facilitates loan to budding entrepreneurs and encouraging habits of saving amongst the masses. ‘In 2009 we extended over £70 billion of new lending to homeowners and businesses’ (lloydsbank.com). 7(b) Community development The bank supports many charities and philanthropic societies that are involved in social development processes, especially support for financial inclusions and sponsorship to sports persons. They have been major sponsor for 2012 Olympic and Paralympics Games and encourage young talented people through various community sponsored sport programmes (ibid). 7(c) Climate and environment The banking group is making significant effort to reduce their energy consumption through reduced consumption of bio non degradable products and helping preserve environment by using recycled goods like paper, glass etc. They also encourage development of cleaner technologies, buy goods from people who promote environment and do business with people who are sensitive towards the environment issues (ibid). 8. Need for ethical leadership within the Bank In the recent times, the role and functions of the banks have gone tremendous transformation. While they have maintained the fundamental principle of banking, they have also expanded their business interests in wide ranging areas that have become controversial and highly unethical in certain sphere of their modus operandi. Ethical leadership initiatives are needed in the banks for many reasons vis-à-vis good business practice, match societal expectation of good corporate conduct, improved transparency and social responsiveness. 9. Evaluation of the website of Lloyds Banking Group http://www.lloydsbankinggroup.com is the cyber address of the Lloyds Banking Group. The site is efficiently designed to portray the profession attitude of the bank. It is extremely efficient in meeting the needs of the wide variety of people requiring financial assistance or advice and offers each of them customized solution. The website also gives an overview of bank’s history and its organizational vision and mission. All in all, it greatly facilitates transparency in operation through its various interactive modules and easy to follow instructions that are designed to make it easy and friendly to use. 10. Conclusion CSR has become a highly commendable effort on the part of the corporate houses, but it is not totally a philanthropic act on their part. CSR also gives them an opportunity to spread their business and at the same times provides them with a credible public image making them popular with the masses. In the contemporary environment of globalization and highly competitive business paradigms, effective CSR policy gives them an edge over their rivals. Thus, it can be concluded that bringing CSR in the ambit of corporate governance within the broader business strategy of Lloyds Banking Group has significantly impacted its performance outcome. (1677) Reference Baron, David E. Integrated Strategy: Market and Non Market components. California Management Review. Vol.37 N. 2, 1995. Caroll, A B. (1979). A Three-Dimensional Conceptual Model of Corporate Performance. Academy of Management Review, 4(4), 497-505. Habish, A., Meister, H.P., & Schmidpeter, R.(Eds.). (2001). 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Business and Society Review, 105 (3):323-345 Wood, D J. (1991). Corporate Social Performance Revisited. Academy of Management Review, 14(4), 691-718. Read More