In the contemporary period, with the occurrence of international phenomena of immense significance like that of the Globalisation, trade and commerce liberalisation as well as infrastructural and technological developments across the globe, the industrial and commercial operations have also undergone considerable changes and dynamics in their operational framework (Schwartz, 2017). Much of these dynamics can also be attributed to the rapidly changing demands and behavioural patterns of the consumers across the globe. These in turn, has led to the increase in the needs among the businesses to operate ethically and responsibly along with that of operating profitably and efficiently, which in turn, has led to rapid popularisation of the concept of “Corporate Social Responsibility” in the global commercial scenario (Tai & Chuang, 2014).
Keeping this into consideration, the concerned essay tries to emphasis on the aspects of ethics and social responsibility in the banking industry, referring to the article named, “The Development of a Stakeholder-Based Scale for Measuring Corporate Social Responsibility in the Banking Industry” (Pérez, Martínez & Del Bosque, 2013). The essay, by focussing on this academic journal article, also tries to reflect on the factors which undermine the performance of the corporate social responsibilities by the businesses operating in the banking industry, thereby suggesting the measures that can be taken by the managers in this industry to avoid these negative aspects.
Corporate Social Responsibility
In general, the term, “Corporate Social Responsibility”, refers to the approaches implemented in the operational frameworks of businesses to ensure the sustainable development of the same, by taking into account the economic, social, environmental and other responsibilities of the concerned businesses, such that apart from ensuring long-term profitability, the companies can also increase the welfare of the different stakeholders associated with the businesses as well as the overall welfare of the community and the society as a whole (Suliman, Al-Khatib & Thomas, 2016).
In a generalised framework, the social responsibilities of a business include the following:
Economic Responsibilities- The primary responsibility of any business, is to remain economically profitable and sustainable, so as to fulfil the interests of the different stakeholders, including the investors, the shareholders, employees and the government under whose domain they operate (Carroll, 2015).
Legal Responsibilities- Apart from staying profitable, the companies also need to abide by the legal regulations and frameworks (wage laws, taxes and similar), so as to stay reputable and sustainable in their operations.
Ethical Responsibilities- The companies also need to operate in an ethical framework, doing the right things and staying fair in their operations, so as to increase their goodwill and reputation among the customers. The ethical responsibilities include the duties of the businesses to the overall environment and also towards the people associated or non-associated with the business (Pedersen, 2015).
Discretionary Responsibilities- Apart from the above-mentioned responsibilities, the businesses also need to contribute to the society and community by using their time and resources.
All these aspects, if taken into incorporation, by the businesses, increase their reputation in the eyes of the investors and desirability of their products as well as services in the eyes of the consumers.
Ethics and Social responsibility in the Banking Industry
Keeping into consideration the above discussion and referring to the concerned article, it can be asserted that, the banking industry, being one of the prosperous and dynamics industries, in the contemporary global scenario, also needs to acknowledge the social responsibilities and the ethical frameworks, which they need to incorporate in their operations as the welfares of not only the consumers, investors, employees but also the society and the communities as a whole, considerable depend on the actions and operations of the businesses operating in the concerned industry (Jizi et al., 2014).
Ethics in the Banking Industry
The primary aspects of ethics in the operational framework in the banking industry, in a generalised framework, include the compliance of the laws, regulations and rules which are imposed by the competent and relevant authorities, by the banks, for the purpose of increasing the level of confidence of the society, where these banks venture (Pérez, Martínez & Del Bosque, 2013). The ethical framework of the banks also ensures that equal and fair treatments are received by all the stakeholders and the principle of “Utmost Good Faith” is also implemented by the banks in the aspects of financial disclosure, thereby maintaining necessary transparency in the same. These help the banks to behave as a responsible corporate citizen (Adeyanju, 2012).
Social Responsibilities of the Banking Industry
As like any other business, the businesses in the banking industry also use the human as well as natural resources of the society extensively and depend on the same for their profitability and sustainability, therefore, the banks are accountable to the society and needs to take into consideration their social responsibilities, which include the aspects like the environment, the economic justice as well as social equity in their business operations and strategies (Mallin, Farag & Ow-Yong, 2014). The operations of the industry, if cause any harm to the environment or to different sections of the society, then the banks need to take the full responsibilities and compensate the suffering sections appropriately. The social responsibilities of the banking industries also include maintenance of transparent business dealings, practices and policies and their accountability to all their stakeholders as well as to the community as a whole, where they venture. Thus, a socially responsible bank, frames robust corporate governance strategies and implements them efficiently and also gives back to the community where they serve (Pérez & Rodriguez del Bosque, 2015).
Some of the social responsibilities which are usually taken up by the businesses in the concerned industry, include those of providing financial aids and business incentives to the weaker and underdeveloped communities of the societies, helping the different NGOs and non-profit organizations for noble causes like health care, education, training and skill development, provision of free ambulances, health check-ups for poor people and also helping in employment of deserving and underprivileged candidates (Bolanle, Adebiyi & Muyideen, 2012).
Significance of Ethics and Social Responsibilities of banking industry
The incorporation of social responsibilities and ethics in the businesses in the banking industry, help in increasing both the reputation and profitability of the banks, by attracting more customers and stakeholders as well as the overall welfare of the society and the community in which they serve. The operations of the banks also become more efficient, in terms of improvement of the internal governance, presence of loyal customers and employees, decreasing the problems of non-performing loans, increasing attraction of ethically conscious clients and other aspects, which in turn makes it crucial for the businesses in the banking industry to incorporate ethics and social responsibilities in their operations.
Factors undermining the social responsibility performances of the Banking Industry
There are several aspects in the operational framework of the banking industry which hamper the performance of the business in the concerned industry, in the aspects of their social and ethical responsibilities (Pérez & Rodríguez del Bosque, 2014). Firstly, the definition of CSR is ambiguous, which in turn keeps the loopholes open for satisfaction of the vested interests of influencing groups at the expense of the welfare of the community and consumers as a whole. This can be seen to be evident from the different banking scams and scandals which have taken place in the contemporary global scenario, including those of the Commonwealth Bank, Australia (insurance fraud) (McIlroy, 2018).
Often the banking officials and those with decisive powers, take advantage of their power and political connections as well as pitfalls in gaining personal advantages and monetary benefits, which hamper the ethical aspects of the banks, which can be seen to be the case with Westpac Banking Corporation. CSR is also highly invisible and depends on the publicity strategies and the role of the media as well as the relationship of the companies with the same. Thus, often the activities of the banking companies go unnoticed, thereby undermining the activities taken by them in these aspects (Pérez & Rodríguez del Bosque, 2014). Building up of local capacities by the companies, for the purpose of carrying out the social responsibilities and providing proper training to the employees to abide by the ethical norms are also challenging and the lack of proper guidelines also hamper the implementation of CSR and ethical activities in the businesses in the banking industry in a generalised global framework.
Strategies to avoid issues hampering social responsibilities in Banking Industry
With the significance of ethics and social responsibilities increasing in the operational frameworks of the businesses in the banking industries, the managers of the banks can take several steps and strategies to combat the issues hampering the social responsibility performances of the banks. The managers can implement strict vigilance and monitoring framework for the purpose of ensuring that powers bestowed with the different officials are not misused for the fulfilment of any unfair vested interests (Sharma & Mani, 2013). The concepts and notions of CSR and business ethics also need to be instilled among the employees of the organizations for the purpose of which the managers of the banks can design and implement training and awareness generation programs in their organizations. The challenges of promotional bottlenecks regarding the CSR activities of the banks can also be considerably reduced by designing proper marketing and promotional techniques so as to increase the level of awareness among the population, regarding the social responsibilities taken up by the organizations, which in turn, may help the companies to gain higher goodwill, reputation and businesses (Hopkins, 2012).
The above discussion makes it evident that in the contemporary period, ethics and social responsibilities have been becoming increasingly significant aspects in every industry in the global scenario and the banking industry is no exception to this. The presence of ethics and social responsibilities in the banking businesses can be seen to be multidimensional and the implications of the same are also substantial. However, the banks, in the global scenario, often experience several bottlenecks and factors which undermine their performances in these aspects. These include fraudulent activities, presence of influence interest groups and corrupt powerful officials, lack of awareness and promotion of CSR activities and others. The managers of the banks can take steps to reduce these problems, which can include those policies of implementation of proper monitoring and vigilance framework, training and awareness generation programs for the employees and proper marketing and promotional techniques to create awareness among the society regarding the CSR activities performed by the concerned companies.
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