Academic journal article Journal of Politics and Law

Compulsory Regulation of CSR: A Case Study of Nigeria

Academic journal article Journal of Politics and Law

Compulsory Regulation of CSR: A Case Study of Nigeria

Article excerpt


The language of CSR is mostly voluntary. Commentators, business organisations and lobbyist have not relented in defining it as a voluntary practice. But events so far suggest that an entirely voluntary concept of CSR is no longer tenable. Particularly in the petroleum industry in developing countries, companies have failed to take CSR initiatives to create sustainable business practices, or contribute to the development of their host states. Rather, they perceive CSR as philanthropic activity for which they expect congratulations and tax breaks but fail to take responsibility for the aftermath of their activities or embark on proactive practices that will prevent those negative fallouts of business practices. However, in Nigeria a bold step was taken to introduce compulsory regulation of CSR into corporate governance via the NEITI Act 2007. This paper examines this initiative and suggests ways to increase its success.

Keywords: CSR, regulation, stakeholder engagement, extractive industries, Nigeria

1. Introduction

Corporate Social Responsibility(CSR) classically described as the concept that business has an obligation to society that extends beyond its narrow obligation to its ownersor shareholders (Bowen, 1953), has generally been promoted as voluntary (McGuire, 1963; European Commission, 2001; Commission of the European Communities, 2006). Only a few definitions contemplate compulsory regulation (Carroll, 1991; Baker, 2010; Bowen, 1953) or the concept of coercion (Utting, 2005; Wettstien, 2009). The dominant argument is that the desire of organisations to maintain legitimacy is sufficient to promote CSR (Tuzzolino and Armandi, 1981; Powell and DiMaggio, 1991; Elsbach, 1994). Legitimacy, in summary, refers to the positive perception the society has of an organisation arising from, among other things, its good CSR profile (Shocker and Sethi, 1974; Deegan, 2002). However, there are arguments that legitimacy can be manipulated (Elsbach, 1994, Suchman, 1995), suggesting it may not necessarily be a good indicator of social responsibility. The strength of the argument and the ambiguity prevalent in the CSR discourse is illustrated by the result of a recent CSR symposium "Corporate Social Responsibility on trial" (2010). At the symposium, Baden as advocate and Harwood as opponent made strong arguments for and against the validity of voluntary CSR which split the "jury" of CSR researchers 50/50. This ambivalence suggests the need to reconceptualise the CSR and regulation debate.

The research question here is therefore whether compulsory regulation can improve CSR. To answer this question, the paper explores compulsory regulation as provided by Nigerian Extractive Industry Transparency Initiative (NEITI) Act 2007. The remainder of this paper is structured as follows. Firstly, literature reviews of the theoretical concepts of stakeholder engagement and regulation is conducted. Secondly, a detailed discussion of Nigeria and its CSR related regulation of Nigerian Extractive Industry, particularly the petroleum subsector. This helps to highlight the supposed justification for the stricter CSR regime in Nigeria. Next is a discussion of the research methodology used in conducting the research. And in the penultimate section, research findings and discussion is presented simultaneously. The paper concludes by giving a summary of answers to the research question and policy suggestions.

2. Literature Review

2.1 Stakeholder Engagement

Arnstein's work on community participation in public governance provides good scale for measuring stakeholder engagement. It describes participation as one where the stakeholders are involved in setting the rules for participation and in choosing who represents them. To be effective, these rules must create a fair and equal playing field for all participants (Arnsteins, 1969). This is especially important where power imbalance exists as is the case between the oil industry (government and oil companies) and the Nigerian populace. …

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