Towards a Mandatory Corporate Social Responsibility for Banks in Challenging Institutional Contexts: A Case Study of Nigeria

Many corporations engage in corporate social responsibility (CSR) activities voluntarily, but there is an ongoing debate about whether the government should intervene in CSR, particularly in countries with challenging institutional contexts. While some have argued that CSR should remain a discretionary exercise, as any attempt to make CSR mandatory through any form of state intervention will negate the meaning and objectives of CSR. However, drawing on the institutional theory, this chapter argues for the need to have some form of legislated CSR for banks operating in countries with challenging institutional contexts. The chapter further acknowledges that a universal CSR framework would be difficult to achieve due to differences in institutional contexts between countries; consequently, the nature, scope, and application of CSR legislation would vary significantly amongst countries as CSR is context dependent. Nonetheless, given the crucial role banks plays in society besides acting as the country's payment system, banks also transform illiquid liabilities into liquid assets, therefore making the banks the drivers of national economic developments globally. Governments in developing and emerging markets (DEMs) should ensure that banks' CSR initiatives are not only meaningful but also impactful by implementing a limited legislated CSR framework. This framework would require banks to establish a CSR committee of the board, make mandatory non-financial disclosures on their CSR activities in their Annual Reports, provide mandatory CSR continuous professional development (CPD) training for bankers, and mandate banks to contribute a certain percentage of their yearly profits before tax to agreed CSR initiatives, among other requirements.