Corporate Social Responsibility In Mauritius Accounting Essay

incorporate Social function In Mauritius Accounting EssayABSTRACTThe purpose of this look at is to size up the current manage of CSR that sozzleds in the pecuniary sector and the tourism sector, much precisely intrusts and hotels, get hold of to need themselves in CSR activities and to examine the relationship betwixt CSR and financial action. In Mauritius Corporate Social communication channel (CSR) has prep atomic number 18ed much popularity and has let a subject of concern, after that the establishment has introduced an innovative rule almost CSR. Previous research on the topic is retrospected, the engagement of Firm in CSR. This instruction by room of questionnaires, in like manner tries to vestigate their motivations behind investiture in CSR. Data collected was then analyzed using SPSS. The results highlighted that thither be no differences betwixt banks and hotels in the motives to engage in CSR activities. The results as well highlighted that on that point is a relationship amidst CSR and monetary cognitive process. Also the implications of an separate(prenominal) findings be discussed and the study concludes with its limitations and directions for future research.CHAPTER 1 INTRODUCTIONOVERVIEW OF CORPORATE kind RESPONSIBILITY (CSR)Mauritius since Post- colonial in aimence, the province over the lastly four decades hasten seen the mono-crop sugar island, our first pillar of the economy has signifi arou ringly moved from the popsicle industry to Financial services industry on large case offshore financial institutions from multinational companies to local anaesthetic industries, such as the large of Rogers Group, Air Mauritius, Island Blyth, Floreal Textile, Mauritius commercialised Bank (MCB), Barclays Bank, HSBC and others.The field of Corporate Social indebtedness has develop exp one(a)ntially in the last decades. In the past both decades, CSR appears to have locomote much omnipresent and perceived as universe actually pertinent to companies all over the terra firma (Aras and Crowther, 2008). It is at the heading of strategic outlook of contemporary organisations of all kinds. A larger result of companies than at any time before atomic look 18 tenanted in a serious efforts to define and in incorporate CSR into all facets of their businesses. In late(a) age a great deal of time and attention has been accustomed over to the imagination of in incarnate kindly office. This basis has considered it necessary to move out take none not only of the economic and financial transactions in a high club, yet excessively the social and environmental consequences a business places on its shargonholders and society as sound as the ecological footprint in all aspects of their functionings, which extends beyond their statutory obligation to comply with legislation.CSR has unpotential been expound as a motherhood go away (Ryan 2002, p. 302) the hot business outcome o f the noughties (Blyth 2005, p. 30) and the talk of the town in bodied circles these days (Mees Bonham 2004). In fact, the last few decades have seen a rise in aw atomic number 18ness on behalf of corporate bodies, on the issue that they have a moral employment to give both(prenominal)thing back to the society. This rise in aw atomic number 18ness is plausibly the substance of the recent corporate filths involving swell up re placeed companies, such as Enron, Parmalat and beingnessCom as well as the growing preserve of climate change on the environment. angiotensin converting enzyme of the fundamental questions still to be answered concerns the effect of corporate socially conceivey behavior on profit expertness. The answers one finds in the specialized literature arenumerous and often contradictory. Views emerging from Corporate Social Responsibility give the bounce contri onlye to the financial motion of a company.This fire, has been described as savant shareholder approach, believes that corporate decision makers must consider a depart of social and environmental matters if they are to maximize long term financial returns. Even if they sometimes can be, CSR initiatives are certainly not ceaselessly compatible with other organizational strategic goals (namely growth and money- devising).(McWilliams, Siegel, Wright, 2006).Even though the link amongst CSR and corporate performance rebrinys tenuous (Lindgreen, Swaen, Johnston, 2009), companies are following to CSR principles and practices and incorporating CSR principles and aims into their overall corporate strategy in exponential numbers racket (Godfrey Hatch, 2007 Lee, 2008 C. Smith, 2003).Similarly, as those study scandals have undeniably raised the view of piggishness among senior managers, CSR is also seen as a tool for counteracting allegation of corporate greed (Deloitte report, 2008).Each company integrates Corporate Social Responsibility polarly. The differences depend on factor s such as companys size, the specific industry twisty, the firms culture, stakeholder demands, and how progressive the company is in engaging CSR. Some companies concentrate on areas which they consider to a greater extent primary(prenominal) for them, for sample human rights or environment while others incorporated CSR in all aspects fields of their operations.CSR IN MAURITIUSCSR initiatives go quite a long way in corporate Mauritius up to 20 historic period back. According to a report by Deloitte et al. (2008), it was found that the contribution in CSR has ongoing at varying period for the companies surveyed. Many enterprises are involved in CSR initiatives for the welfare of their employees and the society. Due to Government limited means to negociate todays social problem, an appeal was made to the clannish sector in July 2009 to knock off 2% of their net prevail to CSR activities. Government suggested that all gains from various companies regardless of their size should invest part of their profit into non profitable organization such as charity, scientific research and wild life to restore and pre pay heed personality in order to maintain a good balance in the ecological system which means to give back to nature. Moreover, the government has set up a national CSR committee comprising of representative members from the public sector, private sector and the civil society. Additionally, the companies need the approval of the CSR committee before the use program or investment in any CSR natural action. In the occurrence that a company has not spent the total amount of the compulsory twain per cent of its profit, it should remit the remaining amount to the MRA.PROBLEM STATEMENTCSR is right away gaining more and more brilliance oddly after the major corporate scandals and due to changes in norms held by the general public. Such changes have given rise of the pastime in the field of CSR. even so, most studies have surd mostly on the consequen ces or end results of engaging in CSR activities. moreover many researchers have worked to find any empirical relationship between CSR and financial performance. Various Studies have identified different kinds of relationship (positive, negative, no relationship), but currently there is no clear empirical relationship. CSR is involved as it is often perceived that there is a contrast between CSR activity and nancial performance with one being harmful to the other and companies having an controlling to follow shareholder value.OBJECTIVES OF THE try outThe main goal of the study is to see the current practice of CSR and what are the motivations that be given firms to engage in CSR activities. The study also aims at evaluating the relationship between turnover and train of CSR activities undertaken. This is an issue which has been the subject of an ongoing debate and has become a topic of concern, in the Mauritian context, especially after that the local government revised legisl ation make investment in CSR activities compulsory. physical objects of the studyObjective 1 To investigate the current practice of CSR conducted by banks and hotels.Objective 2 To investigate what factors prompt firms to increase their involvement in CSRObjective 3 To investigate how these firms benefited from conducting CSRObjective 4 To investigate the differences between firms in different sector of operation in the reasons to engage in CSR activities.Objective 5 To investigate whether there is a relationship between level of CSR activities undertaken and Financial performance.OUTLINE OF THE STUDYChapter One IntroductionThis chapter consists of general overview of CSR. It exits a brief overview of the growing importance of CSR in a general as well as in the context of Mauritius. It consists the problem statement along with the aims and objectives.Chapter Two Literature reappraisalThis chapter consists of reviewing the existing literature by examining various(a) articles per taining to the subject matter. The literature review helps to have a fail understanding of what different researchers found on CSR.Chapter Three Research MethodologyThis particular chapter describes who are the target existence for this survey, what is the sample size, what are the procedures and techniques employ for data collection, the systems used to analyze the data to get results and limitation of the study.Chapter Four Results and DiscussionsThis chapter shows how the collected data is analyzed by carrying out various tests.Chapter Five Conclusions and RecommendationIn this chapter, conclusions are derived from the study and some recommendations are mentioned forward.CHAPTER 2 LITERATURE REVIEWCORPORATE affable RESPONSIBLE A DEFINITIONCorporate social responsibility (CSR) is a fast-growing facets of organizations. The European Commission defines CSR as a concept whereby companies define voluntarily to contribute to a break society and a speckless environment. (Simms 2002). Adams and Zutshi (2004) define it as the integration of business operations and values whereby the interest of all stakeholders including customers, employees, investors and the environment are reflected in an organisations actions and policies.In present concept of CSR states that the business enterprises is in their usual process of business decision making should pay due attention to the social interests of the people in the community. A company is not only an economic entity but a social and political entity also. Most of the decisions taken by businesses not only make believe the stockholders but also the stakeholders namely, creditors, debtors, employees and the society at large in one way or the other. ( Kapoor and Sandhu, 2010).CSR is nowadays gaining more and more importance especially after the major events such as the collapse of Enron and the James Hardieasbestos scandal in Australia and due to changes in norms held by the general public. The argument slightly the place of CSR in the global economy continues with Solomons opinion that multinational corporations should take responsibility for the improvement of instauration-wide social and environmental conditions. (Scherer and Smid in Windsor 2001, p. 245).CSR is also looked upon as an umbrella term, including many other business concepts and social practices. Synonymous with some and overlapping a few others, CSR indicates the concept of common relations between businesses and society the world over. clientelees, however small or large, are governed by their place in society and have to take into account the responsibility they bear to the society, people and environment within which they absorb.Economist Theodore Levitt criticizes in the Harvard Business Review that is no longer fashionable for the corporation to take rejoicing pride in making money. What fashionable for the corporation to show that it exists to serve the public (Time, 2008). It is now being more and more realized w orld over that a firm cannot afford to function and continue in the long run unless it performs in a legitimate and socially answerable way.Moreover, many recent definitions draw attention to the financial benefits gained through CSR. For example, Vaaland et al (2008, p. 931) explain CSR as precaution of stakeholder concern for responsible and irresponsible acts relate to environmental, ethical and social phenomena in a way that creates corporate benefit. patch Mittal et al (2008, p. 1437) define the concept as a business approach that views respect for ethics, people, communities and the environment as an integral strategy that improves the warlike bewilder of a firm.Hence, it is historic to understand the point that, whether corporations appreciate it or not, herein lies the idea of CSR. The matter is not that of profit earning alone for a corporation, but that of looking beyond the profit-making attitude. This awareness has made corporations identify the need of CSR and it s application along with their particular businesses (Gupta and Saxena, 2006). scotchs drivers of CSRResearchers have identified different method in which CSR approach to business decision making whitethorn engineer to better financial performance.The following economic drivers have been viewed by the World frugal Forum and Business in the Community that have explained the acceptation of the concept corporate social responsibility by companies around the world (ADL 2003). It is advocated that these drivers do not operate in isolation, and that different companies may have different drivers. Several drivers may also be stronger in different areas and for different companies. An alteration to adopt corporate social responsibility may arise from a combination economics of drivers.Employee recruitment, motivation and retention late studies show that corporate social responsibility is more and more an important factor in attracting and retaining a brilliant and diverse workforce (Glo bescan Inc 2005). Companies that leave for the interests of their employees by offering good working conditions impart attain better performance in basis of quality and delivery, and, thus, experience higher levels of productivity. scholarship and innovationLearning and innovation are serious to the long-term selection of any business. Corporate social responsibility can be a vehicle for business to respond to environmental and social risks and turn these into business prospects.Reputation managementBusinesses function in a market of opinion. Depending on the judgment by customers, suppliers and the broader community on companies will have an impact on their profitability and achievement. Corporate social responsibility offers a means by which companies can manage and influence the attitudes and opinions of their stakeholders, building their trust and change the benefits of positive relationships to deliver business advantage.Risk profile and risk managementCorporate social res ponsibility offers more effective management of risk, portion companies to reduce unnecessary losses, identify new emerging issues and use positions of headship as a means to gain competitive advantage.Investor relations and access to capThe investment community is increasingly viewing corporate social responsibility as similar to long-term risk management and good brass practices. Recent studies show that analysts place as much emphasis on corporate report as they do on financial performance (Hill Knowltown 2006).Licence to operate A Global OutlookCompanies that fail to attain their duties to society as a whole risk losing their licence to operate a concept whereby a companys stakeholders grant the company an unwritten effectiveness to do business. This may be supported by favoring competitors, refuses or calls for deregistration. hypothetical PERSPECTIEVS OF CSR IN PRACTICECSR activities and practice used are not intend to be exactly the same in different companies. Compa nies have diverse resources and all cannot take responsibility to the same consequence. According to Lantos (2001), organizations may practice three different forms of CSR namelyEthical CSRIt means going beyond the firms economic and legal obligations and take actions that is chastely mandatory. A corporation is morally responsible towards any individual or group that might be harmed or injured by a particular course of action. For example reduce shareholders profits and used the money to decrease pollution. Ethical CSR may in the long-run generate goodwill by building the publics trust in the company. This will probably minimize the cost of fines and also corked publication that otherwise may prevail from unethical behaviour.strategic CSRIt is an activity where there is a win-win situation. Both the company and some of the stakeholder will benefit. This pillow slip of CSR actions implies short-run sacrifices which will usually result in long-run gains. For example, crosswalk c ampaigned that children should be seated in booster-seats and gave away one thousand thousands of such seats. This generated goodwill among customers and government regulators. They believe that the investment will be profitable in the end.altruistic CSR.It is when organizations are contributing to the common good and making the Society a better place on some sort of expense of the firm, involving corporate competences of the company to societal and community needs. Altruistic CSR goes beyond ethics and are actions that are not necessary for the company to take. The company does not seem any financial gain from it. Examples of altruistic CSR are activities that aid the society to fight drug and alcohol problems, meagreness, crimes and chronic unemployment.The three approaches are reciprocally exclusive and based on the activities nature (required or optional) and the purpose (stakeholders good, firms good), or both.Today businesses are facing high competition which many firms ind irect request to perceive as best quality or valuable in customer perception. Moreover, the number of multinational companies has been increasing each social class and it demanded a higher responsibility for social, environmental and economic. As the result, the influence of Sustainable instruction is growing and accepted from all people. Moreover, due to the environmental issue, many researchers are concerned about environment that many natural resources can be run out if we do not use it wisely.CSR emphasizes the concern of corporate action and accomplishment in the social sphere with a performance perspective, it is clear that firms must formulate and run through social goals and programs as well as integrate ethic sensitivity into decision making, policies, and actions(Carrol,1991). As in the present time, CSR turns peoples attention to be the perception of the corporate engagement, in terms of how well corporate is able to engage with stakeholders.Current practice of CSR wo rldwideIn practice much of the business activity that has been labeled as CSR has been determined by the concerns of investors, companies and consumers based in the worlds richest countries. National CSR agenda in heart and soul and low income countries have been less viewed internationally.For the past five familys or so, governments, companies and NGOs in many middle and low income countries have apply CSR program from developed countries through greater direct engagement. CSR activities have developed in countries such as China, India, South Africa, the Philippines, Brazil and others. Governments in middle income countries have pressed companies to engage in summiting these tasks, as with Black Economic Empowerment in South Africa encouragement of business efforts to reduce poverty in the Philippines.CSR has also potential link with government strategies aiming at ensuring better access of certain categories of citizens to the economy. One example of such strategy is the Citiz en Economic empowerment in Zambia, which aims in particular at increasing local participation in economic activities.With detail to developing countries, one major CSR concern is that government will ignore corporate irresponsibility or refuse to enforce protective efforts or environmental criteria in the police as an incentive to foreign investment (Aman, 2001). China for instance, has heavy-duty to collective negotiations, by law, and yet many people in jail for move to use those rights (Diamond, 2003). Yet some developing solid ground governments are convey laws requiring higher standards of responsible environmental or social ways in order to compete for foreign working capital and institutional investment, in humanitarian to competing on the more familiar rule of law issues of contract and shoes law rights, financial transparency and reduced government corruption (Hebb and Wojcik, 2004). canvass these legal improvements in different emerging countries would be further i nstrumental in understanding the contribution of CSR.Chapple and Moon (2005), have found that CSR in Asia is unrelated to preexisting levels of economic development but is related to the extent to which domestic companies engage in international trade, even where that trade is with other Asian nations.THE CURRENT PRACTICE OF CSR BY BANKS AND HOTELS IN MAURITIUSMauritius is the first country in the world to require businesses to donate a portion of their profits to NGOs or government projects in the name of Corporate Social Responsibility (CSR).Apparently recognising the poor level of corporate citizenship in Mauritius, in 2009, the Ministry of pay introduced the CSR Fund.A company using a Corporate Partner to implement its CSR programme will be allowed to spend only an amount not exceeding 25% of the CSR Fund. A company implementing CSR programme is eligible to administrative costs not exceeding 15% of the CSR value.The company is provided a 12 months period from the end of its fin ancial year to fund project from its CSR fund. If it has not given the 2% CSR fund then they will have to inject it to the MRA. The corporate programme form and Declaration by Applicant is presented infra in Appendix D.Banks in Mauritius especially the leading one such as Mauritius Commercial Bank (MCB), State Bank of Mauritius (SBM), HSBC, Barclays and such that, invest huge amount of money in CSR. Not only Banks but also in the Hotel sector invest in CSR. The role plays by some Banks and Hotels in CSR are briefly described belowMauritius Commercial Bank (MCB)J.Francois (2012), of the MCB Forward pedestal, in the Mauritius lexpress Journal talk about A CSR Budget of Rs 45 one million millions. The establishment of the MCB foundation in 2010 was a flavor in the development of CSR activities of the group. Since its creation, MCB has always affirmed as a bank with a heart. The foundation gather dedicated professionals concentrated only on CSR and handle projects in medium and lo ng terms. Moreover in 2007-2008, Rs23 millions have dedicated to CSR. In 2008-2009, it has been increased up to Rs30 millions. According to J. Francois (2012) the CSR budget varies with their profits. For the Financial year of 2009-2010, they predicted about Rs45 millions. They invest the money of CSR mainly in eradication of Poverty, Vulnerable Children, Education, and Environment. The value proposition of the Foundation is described below.MCB Forward FoundationWhy the FoundationTo help meet the social and environment challenges of the countryMissionTo develop and support sustainable initiatives for the benefit of the community in which we live and workVisionTo be instrumental in the creation of sustainable value for the social, environmental and economic well-being of the communityHSBC MauritiusHSBC Mauritius has go along to invest in preparation, poverty alleviation and environmental sustainability. In the year ending December 2011, the HSBC group in Mauritius has spent 6 milli on Rupees on community investment. In addition to sustaining communities, HSBC has been continuously involved in environmental sustainability. It also has a long partnership with The Mauritian Wildlife Foundation, engaged in precludeing rare species.Sun Resort (including La pirogue, le Tousserouk, capacious beach hotel and such that)Sun Resort Company has commitment towards corporate social responsibility programmes at both local and national level has proved to be a very influential tool for the increase of local communities and unprivileged circles of the population. In 2010, the Sun Resorts crabby person Trust helped a number of children and their families in their fight against cancer. The company also has opened a four-bed Cancer Unit at Victoria Hospital in May 2009. Corporate Social Responsibility donations made by Sun Resort Ltd during the year 2010 amounted to Rs3.9 million.Apart from Hotels and Banks, there are other private companies such as Terra, Ireland Blyth Limit ed (IBL), Omnicane and such that, they invest much in CSR projects. For instance, the IBL Foundation has financed 80 projects costing Rs17, 9 million. Rs6, 7 million for the socio economic development, Rs6,4 million for education and Rs1,2 million for sports. Moreover, there is the Omnicane Foundation which have spent Rs11, 1 million for vulnerable children, Health care, Education, Eradication of Poverty and on environment.MOTIVATIONS FOR FIRMS TO ENGAGE IN CSR ACTIVITIESTHEORETICAL PERSPECTIVESThe motivations for firms to engage themselves in CSR activities can thus be in general viewed from two main perspectives which are strategic perspective and the moral perspective.Strategic motive linked with Agency theoryAgency theory put emphasis on the point that managers are recruited in order to work for the company that employs them, thus their major duty is to maximize the value of the firm and thereof the wealth of those who possess the company. Moreover, from an agency theory persp ective, engagement in CSR activities is often viewed as a misused of companys resources which could instead be used invest in projects where profits are maximized. Nevertheless, managers will invest in CSR activities only if such investment will help them to improve the spirit of the firm or simply help them to increase shareholders wealth (Jones, 1995). However an agency problem may occur because of concern that the agent (e.g, the interior or external recipients of funds) will not follow the interests of the principal (e.g., the donor) who wishes to employ CSR activities (Husted Allen, 2007). Very often, managers are motivated by their self- interest and therefore cannot be relied on to work in the best interest of shareholders.Strategic motive linked with the Resource-Based View TheoryThe Resource- Based View (RBV) theory regards CSR as a resource that firm must know how to exploit in order to gain competitive advantages over its competitors. According to Branco and Rodrigues (2006) the firm in this model, is viewed as a unique bundle of resources and capabilities that is developed overtime as the firm interacts with all its stakeholders. This theory assumes that firms are a set of various resources and competences that are not exchangeable among firms.THE MORAL MOTIVE LINKED TO THE normative STAKEHOLDER THEORYThe moral motive is also linked to the normative stakeholder theory, which is ordinarily known as intrinsic stakeholder commitment. Success of an organization, according to the stakeholder theory, depends on the ability of the firm to handle and manage its relationships with a number of constituents, such as financers, shareholders, customers, employees, suppliers and then community at large (Donaldson and Preston, 1995).According to Freeman (1984), managers also bear a fiduciary relationship to stakeholders instead of having solely fiduciary duties towards owners of the firm. Similarly, Donaldson and Preston (1995) defined stakeholders as pers ons or groups with legitimate interests in procedural and or substantive aspects of corporate activity. Thus, CSR is viewed as a means of fulfilling the duties that the company has towards its stakeholders, and therefore it is decisive that the firm engage itself in CSR activities that are significant to the stakeholders. However, the more influential stakeholders are, the more the company has to adjust itself to their demands and this has given rise to questions whether firms engage themselves in CSR activities because they really want to assume their social and moral responsibilities or this is done only to get strategic advantages such as to prevent any stakeholder from withdrawing their support to the firm.Meijer, Bakle, Smith Schuyt (2006) argued that despite the fact it is rational to take over that companies want to do good for the society, it is also true that managers of those companies realize that this will benefit their organizations as well. Thus, put in simpler term s even though reporting pure unselfish intentions, firms engage themselves in CSR from strategic perspectives.On the other hand, Graafland and Van de Ven (2006) exposed through their study that despite some firms strongly believed that engaging in CSR activities might lead to improvement in profitability, enhancement of reputation and more employee commitment, they were also much concerned with making the world a better place to live.BENEFITS OF ENGAGEMENT IN CSR ACTIVITIESThis variance will try to examine what are those advantages firms get by invest in social activities which, as many academics found, ultimately leads to improvement in the firms financial performance.According to Galbreath (2009), there are only three main benefits a firm can derive from investing in CSR activities and they are namely increased customer satisfaction reduced employee turnover and meliorate reputation and. It is these benefits that will consequently lead to improvements in the financial performa nce of the company.Increased customer satisfactionCustomers are one of the most important stakeholders of a firm and by meeting justice needs of customers, CSR is likely to increase customer satisfaction (Galbreath, 2009). Hence, customer satisfaction may lead to brand loyalty and consequently improve and increase future gross revenue of the firm.Reduced employee turnoverEmployee turnover is of the essence since the loss of human capital in companies can have dramatic effects on competitive advantage of a company (Barney, 1991 Huselid, 1995). A key potential gain from CSR initiatives involves establishing the situation that can contribute to increasing the dedication and incentive of employees to become more innovative and dynamic. Galbreath (2009) found that, owing to demonstrated justice, socially antiphonary activities appear to be a means to reduce employee turnover.Turban and discolor (1997) found that demonstrating CSR is essential for attracting potential employees. In their study on french firms, Maignan and Ferrell (2001) found that CSR is positively linked with employee commitment. Companies employing CSR related perspectives and tools tend to be businesses that provide the prerequisite for increased loyalty and commitment form their staffs.Such conditions can facilitate recruitment of employees, retaining and motivating them to develop skills, reduce absenteeism, and may also translate into marginally less demands for higher wages (Deloitte Report, 2008). According to Galbreath (2009), firms that are unjust, that does not exhibit comportments that match with employees moral or ethical frameworks are prone to obtain negative results that affect profitability. Therefore, reducing employee turnover is crucial so that a firm can improve its performance.Improved reputationMoreo