EFFECT OF THE PRACTICE OF SOCIAL RESPONSIBILITY ON THE PERFORMANCE OF SMALL MEDIUM ENTERPRISES (SMES) IN AGEGE LOCAL GOVERNMENT AREA, LAGOS

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

This chapter distinguishes between socially responsible policies and policies that simply represent sound business practice. Attention to customer preferences is sound business practice and requires no justification other than the remuneration it provides. Similarly, creating a culture that builds mutual commitment between the firm and its employees requires no justification beyond the benefit it provides. In contrast, responding to a community need for low, income housing is beyond the normal scope of sound business practice. The strategic use of corporate social responsibility to increase profit thus should be distinguished from morally motivated actions.

The motives for taking action are also important for distinguishing between socially responsible actions and actions that are forced on the firm by its environment. Negotiating with an interest group to minimize the damage it could impose should be should be distinguished from an action taken voluntarily by a firm. Social responsibility is the management philosophy, policy, procedures and actions that have the advancement of society’s welfare as one of its primary objectives.

In dynamic society like ours, business organizations either in the private or public sector are being called upon to perform their social responsibilities to the society. The relationship between organization, society and participants is very complex yet dynamic. The notion of social responsibility has emerged out of dynamism of the relationship between these parties. Corporate organizations have grown in size, the level of education has significantly increased and people now ask a lot more questions about their rights and privileges. Related to this is the fact that the awareness of the social impact of business activities on the society as a whole is enormous both directly and indirectly. For as long as a business organization remains a sub-system of the society, the business manager is left with no other choice but to be concerned with social responsibility is a nebulous concept that has been described in a number of ways. Most writers on social responsibility see the concept as the disposition of an organization to exhibit “missionary rather than mercenary”. Attitudes towards the society social responsibility can be defined as “the intelligent and objective concern, which restrains individual or corporate behaviour from ultimately destructive activities no matter how immediately profitable, and leads to the direction of the positive contribution of human betterment” (Steiner, 2001).

Presumably, corporate executive as agents of the owners are to be responsible for conducting he business in accordance with the desire of the owners while confirming to the basic rules of the society. The responsibility has three broad facets (Edward, 2002):

1.     Contribution to charity.

2.     Elimination of social costs.

3.     The adoption and observance of ethical codes aimed at reducing business malpractice.

In summary, Nigerian business organization and other type of business must be seen in many actions domains can pursue social responsibility in areas such as: Concern for ecology and environment, Commitment to quality, Truth in advertisement, Customer’s satisfaction and education. Other concerns includes: Service to community needs, fair employment practices, progressive labour relations employment assistance and corporate philanthropy (Forters, 2002).

The strength of an organization’s commitment to corporate social responsibility ranges from low to high. At the low end of the range is an obstructionist approach (fight the social demands), which reflects mainly economic priorities. A defensive approach (“do the minimum legally required”) indicates the least commitment to ethical behaviour it seeks to protect the organization by doing the minimum legally required to satisfy expectation. Accommodative approach (“do the minimum ethical required”) is an acknowledgement of the need to support social responsibility. Organizations adopting such strategy accept their social responsibility role and try to satisfy criteria of economic, legal and ethical responsibility.

Finally, the proactive (assumed leadership in social initiatives) is designed to meet all the criteria of social performance. Managers taking a proactive approach activity embrace the need to behave in socially responsible and go out of their ways to learn about the needs of different stakeholders and are willing to utilize organizational resources to pursue the interest of the stakeholders (Friedman, 2009).

1.2     RESEARCH QUESTIONS

û  Does consistent social responsibility have an affect in organizational profitability?

û  To what extent does social responsibility affect organizational market share?

û  Does intensive social responsibility have an impact on organization sales volume?

û  To what extent does social responsibility reduces social crisis.

1.3     RESEARCH HYPOTHESES

û  H₀: There is no significant relationship between social responsibility and organizational profitability.

H₁: There is significant relationship between social responsibility and organizational profitability.

û  H₀: There is no significant relationship between social responsibility and organizational market share.

H₁: There is significant relationship between social responsibility and organizational market share.

û  H₀: There is no significant relationship between social responsibility and organizational sales volume.

H₁: There is significant relationship between social responsibility and organizational sales volume.

1.4     STATEMENT OF PROBLEMS

Advocate of social responsibility observed that expectations of various groups in the society are not being met by organizations. These groups are creditors, current and retired employees, customers, suppliers, competitors, all levels of government community environment, the human right organization etc. Their expectation ranges from safe and meaningful jobs, clean air and water, good pay packages, charitable donations, safe products sponsoring of academic research, scholarship awards, sports development etc. The research study is therefore designed to identify: The responsibility a business organization owes the society and its effect on its productivity, the areas in which business organization can help the society and vice-versa as well as the implications vis-avis benefit to the two parties. Problems encountered by the business organization in Nigeria in the course of discharging their social responsibility: profitability market shares, sales volume.

1.5     PURPOSE OF THE STUDY

The general objectives of the study is to examine the effect of practicing social responsibility on the performance of small and medium scale enterprise (SMES) in Agege Local Government area of Lagos State.

Thus, in order to achieve the above objective, the following specific objectives shall serve our guide.

û  To examine the impact of social responsibility on organizational profitability.

û  To determine the extent to which social responsibility affect organizational market share.

û  To ascertain the extent to which social responsibility affect organizational market share.

û  To examine the effect of social responsibility on social crisis.

1.6     SIGNIFICANCE OF THE STUDY

At the end of the research work, it is hoped that the research would describe the method, techniques and means by which the practice social responsibility enhanced the performance of SMES. Thus, becoming a useful source of material for teaching and future research purpose.

It will exhibit the benefit enjoyed by both organizations and communities that inculcate corporate social responsibility.

1.7     SCOPE OF THE STUDY

This study would focus extensively on the social responsibility on the performance of SMES in Agege Local Government Area of Lagos State.

This study will cover and examine the effect of social responsibility on social crisis.

This scope will examine the impact of social responsibility on organizational profitability.

1.8     DEFINITOIN OF TERMS

û  Social Responsibility: It is the management philosophy, policy, procedures and actions that have the advancement of society’s welfare as one of its primary objectives.

û  Accommodative Approach: Is an acknowledgement of the need to support social responsibility.

û  Proactive Approach: Is designed to meet all the criteria of social performance.

1.9     ORGANISATION OF THE STUDY

This study contains five chapters which are as follows:

û  The first chapter shall contain the background, the objectives, statement of the study, research question of the study, significance of the study, scope of the study and definition of terms.

û  The second chapter shall contain the literature review of the study.

û  The third chapter shall contain the research methodology of the study, the research hypothesis of the study.

û  The fourth chapter shall contain the data presentation and interpretation of regression results.

û  The fifth chapter shall contain the summary of findings, conclusion and appropriate recommendation.

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