Corporate Social Responsibility in the Banks of Bangladesh in Context of Premier Bank, Bangladesh

INTERNSHIP REPORT

“Corporate Social Responsibility in the Banks of

Bangladesh in Context of Premier Bank, Bangladesh”

Submitted by

Md. Aminul Islam

ID: 47, Batch- 3rd

Department of International Business

University of Dhaka

Submitted to

Mithun Kumar Acharjee

Lecturer, Department of International Business

University of Dhaka

I

Corporate Social Responsibility

in the Banks of Bangladesh

in Context of

Premier Bank, Bangladesh

II

Letter of transmittal

13th May, 2013


Lecturer, Department of International Business

University of Dhaka

Subject: Submission of the Internship Report

Dear Sir,

I am here by submitting my internship report on “Corporate Social Responsibility in the

banks of Bangladesh in context of Premier Bank, Bangladesh”. While preparing this report I

worked as an intern for 15 days in Premier Bank., Bangladesh under the supervision of Mr.

Mir Abdur Rahim (Chief Risk Officer Risk Management Division) and Mr. Md. Abdul Hai

(SEVP & CFO Financial Administration Division). This report has helped me to gain both

academic and practical exposure. I have tried to put my sincere effort in taking interview and

studying the related materials, documents, annual reports and compiled them as

comprehensively as possible.

I am grateful to you for your guidance and kind cooperation at every step of my endeavour

on

this report. I shall remain deeply grateful if you kindly take some pen to go through the report

and evaluate my performance

Yours faithfully,

______________________

Md. Aminul Islam

Id-47, Batch-3rd,

Department of International Business,

III

Letter of Endorsement

The Internship Report entitled “Corporate Social Responsibility in the Banks of Bangladesh

in Context of Premier Bank, Bangladesh”, has been submitted to the department, in partial

fulfilment of the requirements for the degree of Bachelor of Business Administration, Major

in International Business, Faculty of Business Administration on 5th August, 2014 by, Md.

Aminul Islam, ID: 47. The report has been accepted for evaluation.

______________________


Lecturer , International Business

University of Dhaka, Bangladesh

IV

Executive Summary

This report is based on “Corporate Social Responsibility in the banks of Bangladesh in

context of Premier Bank, Bangladesh”. This research has tried to find to out CSR activities in

details, various CSR activities, Intensity of various sectors of CSR in CSR Budget and

whether any link exists between Company performances and CSR activities in context of

Premier Bank., Bangladesh. Premier Banks defines CSR in five dimensions – 1. Economic

Responsibility – earn profit for owners. 2. Legal responsibilities to comply with law. 3.

Ethical responsibilities not acting just for profit, doing what is right, just and fair. 4.

Voluntary and philanthropic – promoting human welfare and goodwill. 5. Being a good

corporate citizen. There is no guideline about CSR in Bangladesh, although Bangladesh bank

has handled a two page document about CSR to Banks. Premier bank does not use voluntary

guidelines. So, there is no specified procedure for implementation of CSR. Whenever a

person or entity is in need of money, normal application for aid is submitted by them and then

the application is verified by the personnel responsible for managing CSR. At the end of this

research it was found that there is no significant relationship between “THE PREMIER

BANK LTD’’s Corporate Social Responsibility and Corporate Financial Performance.

There some challenged perceived by Premier Bank of Bangladesh such as lack of

transparency and immoral behaviour of concerned person of CSR ,no specified or detailed

guideline served by Bangladesh Bank ,in some aspects, CSR is practiced as legalized way to

extortion by political parties.

V

List of Figures

Figure 3.1 1:Moral Obligation Theory..................................................................................... 18

Figure 3.1 2 :Theories of the Good .......................................................................................... 19

Figure 3.1 3: Theories of the Right .......................................................................................... 20

Figure 3.2 1 Conceptual Framework ....................................................................................... 21

Figure 5.1 1 Economic responsibility ..................................................................................... 24

Figure 5.4 Voluntary and philanthropic ................................................................................... 26

Figure 5.5 SECTOR WISE EXPENDITURE IN LAST FIVE YEAR .................................. 31

Figure 5.6 Investment on Disaster and Relief Sector .............................................................. 32

Figure 5.7 Investment on Education ........................................................................................ 33

Figure 5.8 Investment on Environment .................................................................................. 34

Figure 5.9 Investment on Health and Safety ............................................................................ 35

Figure 5.10 Investment on Social Welfare .............................................................................. 36

Figure 5.11 Investment on Sport ............................................................................................. 37

Figure 5.12 1 CSR Expenditure in 2010 in various Sector ...................................................... 38

Figure 5.12 2 CSR Expenditure in 2011 in various Sector .................................................... 39

Figure 5.12 3 CSR Expenditure in 2012 in various Secto ..................................................... 40

Figure 5.12 4 CSR Expenditure in 2013 in Various Sectors ................................................. 41

Figure 5.13 1 : CSR at Various Categories in Last Four Year ............................................... 42

Figure 5.13 2 CSR at Various Categories in Last Four Years in Line chart ............................ 43

VI

List of Tables

Table 3.3 1 Research hypothesis:............................................................................................ 21

Table 5.2 1Conflict with NRB ................................................................................................. 25

Table 5.4 1 Investment on CSR ............................................................................................... 27

Table 5.5 1 CSR expenditure of Premier Bank at a glance ..................................................... 27

Table 5.6 1 Investment on Disaster and Relief Sector ............................................................. 32

Table 6 .7 1 Investment on Education ..................................................................................... 32

Table 5.9 1 Investment on Health and Safety .......................................................................... 35

Table 5.12 2 CSR Expenditure in 2011 in Various Sector ...................................................... 39

Table 5.12 3 :CSR Expenditure in 2012 in various Sector ...................................................... 40

Table 5.12 4 : CSR Expenditure in 2013 in various Sector ..................................................... 41

Table 5.13 1 : Comparative analysis of various sectors in last five years ............................... 42

VII

Table of Contents

Corporate Social Responsibility ................................................................................................ I

Letter of transmittal................................................................................................................... II

LETTER OF ENDORSEMENT .............................................................................................. III

Executive Summary ................................................................................................................. IV

List of Figures ........................................................................................................................... V

List of Tables ........................................................................................................................... VI

Table of Contents ................................................................................................................... VII

Chapter 1: Introduction .............................................................................................................. 1

1.1 Rationale of the Study ...................................................................................................... 1

1.2 Objectives of This Study .................................................................................................. 1

1.3 Scope of the Study............................................................................................................ 1

1.4 Contribution of the Study ................................................................................................. 2

1.5 Limitations of the Study ................................................................................................... 2

Chapter 2: Literature Review ..................................................................................................... 3

2.1 Introduction ...................................................................................................................... 3

2.2 Definitions of CSR ........................................................................................................... 3

3.3 Components of CSR ......................................................................................................... 6

Chapter 3: Theoretical Model and Hypothesis .......................................................................... 9

3.1 Various Theories .............................................................................................................. 9

3.2 Conceptual Framework .................................................................................................. 21

3.3 Research hypothesis: ...................................................................................................... 21

Chapter 4: Methodology .......................................................................................................... 22

4.1 Research design: ............................................................................................................. 22

4.2 Data ................................................................................................................................ 22

4.3 Population and Sample ................................................................................................... 22

VIII

4.4 Reliability, Validity and Generalizability ...................................................................... 22

4.5 Ethical Stance ................................................................................................................. 23

Chapter 5: Analysis, Findings and Discussions ....................................................................... 24

5.1 Economic responsibility ................................................................................................. 24

5.2 Legal responsibility - to comply with the Laws, Rules and Regulations ....................... 25

5.3 Ethical responsibility - not acting just for profit but doing what is right, just and fair .. 26

5.4 Voluntary and philanthropic........................................................................................... 26

5.5 CSR activities of Premier Bank from 2010 to 2013 ...................................................... 27

5.6 Investment on Disaster and Relief Sector ...................................................................... 32

5.7 Investment on Education ................................................................................................ 32

5.8 Investment on Environment ........................................................................................... 33

5.9 Investment on Health and Safety ................................................................................... 35

5.10 Investment on Social Welfare ...................................................................................... 36

5.11 Investment on Sport ..................................................................................................... 37

5.12 Year wise CSR Analysis .............................................................................................. 38

5.13 Comparative analysis of various sectors in last five years ........................................... 42

5.14 Hypothesis Test ............................................................................................................ 43

Chapter 6 : Conclusion and Recommendations ....................................................................... 45

6.1 Conclusion ...................................................................................................................... 45

6.2 Recommendations: ......................................................................................................... 45

6.3 Reflection of the Researcher .......................................................................................... 46

References: ............................................................................................................................... 48

Appendices ............................................................................................................................... 52

Data Collection Instrument .................................................................................................. 52

Interview Transcripts: .......................................................................................................... 52

Statistical Output .................................................................................................................. 52

1

Chapter 1: Introduction

1.1 Rationale of the Study

There are lot of reasons and rationale behind the study. Now a day the business world is

greatly influenced by their Corporate Social Responsibilities (CSR). It is also a modern

marketing concept. Here it is very important to study about Corporate Social Responsibility

(CSR) of different company, bank, and financial institution. In this regard as a renowned and

large private online bank of Bangladesh, the study of Corporate Social Responsibility (CSR)

of “THE PREMIER BANK LTD’ is very important. The rationale behind this study is to gain

knowledge about Corporate Social Responsibilities of ‘THE PREMIER BANK LTD’

1.2 Objectives of This Study

The main objectives of this study are as follows:

To get a broader overview of CSR (Corporate Social Responsibility).

To identify the CSR activities served by Premier Bank Limited.

To identify the intensity of various sectors of CSR

To find out the link between CSR and Companies financial Performance

To find The link Between CSR and Number of Employees

1.3 Scope of the Study

The Corporate Social Responsibility of “THE PREMIER BANK LTD’ is the scope of this

study. The study covers idea about Corporate Social Responsibility (CSR), various

knowledge and activities of CSR in “THE PREMIER BANK LTD’ .This report does not

generalise the CSR activities of banking industry as a whole

2

1.4 Contribution of the Study

The outcome of the research will help to understand the important role of (CSR) activities of

“THE PREMIER BANK LTD’. Bangladesh and how it is contributing to the financial

performance and society. This research paper can also be used by other researchers to carry

further studies on (CSR) activities in the future. This will help the researchers to save

precious time during their research. This research paper will also contribute to the limited

amount of research done on CSR in Bangladesh.

1.5 Limitations of the Study

The following limitations are apparent in the report

1. 15 days of internship was not enough for a complex subject like CSR.

2. Lack of adequate primary and secondary data of the subject of the selected bank

3. The officials were unwilling to disclose all data and information regarding CSR for

the reason of confidentiality.

4. The bank’s employees were very much busy in banking hour. So it was very difficult

to have them for equitable long time.

5. Lack of practical experience in the relevant field I faced many problems in

formulizing the data.

3

Chapter 2: Literature Review

2.1 Introduction

There are several reasons this literature review has been conducted. Firstly, It will ensure

me have a thorough understanding of the topic CSR. Secondly it helps me to identify

potential research objectives. Thirdly it gives me knowledge about similar works done

within the area. It helps me Identifying knowledge gaps that demand further investigation. It

works as a platform to compare previous findings and suggest further studies. Corporate

social responsibility (CSR) is also known by a number of other names. These include

corporate responsibility, corporate accountability, corporate ethics, corporate citizenship or

stewardship, responsible entrepreneurship, and ―triple bottom line, to name just a few.

Like various names there are a lot of definitions of CSR .Academicians and corporate

leaders try to define CSR from various dimensions, but fail to deliver a unified definition.

2.2 Definitions of CSR

There are a lot of Definitions regarding CSR in Corporate and academic world. There are

some similarities and dissimilarities on these definitions and Alexander Dahlsrud (2006)

categorised those definition as The environmental dimension, The social dimension, The

economic dimension, The stakeholder dimension and The voluntariness dimension.Some

writers define CSR from all of the perspective mention above .For Example (Commission of

the European Communities, 2001; Business for Social Responsibility, 2000; Global

Corporate Social Responsibility Policies Project, 2003; UK Government, 2001;Van

Marrewijk, 2003) define CSR from all the five dimensions. (Commission of the European

Communities, 2001) defines CSR as “A concept whereby companies integrate social and

environmental concerns in their business operations and in their interaction with their

stakeholders on a voluntary basis”. Like Commission of the European Communities some

other organizations and researchers also take the similar route (Global Corporate Social

Responsibility Policies Project, 2003) defines CSR as ‘Global corporate social responsibility

can be defined as business practices based on ethical values and respect for workers,

communities and the environment’ .(Van Marrewijk, 2003) defines CSR as ‘ In general,

corporate sustainability and CSR refer to company activities voluntary by definition

demonstrating the inclusion of social and environmental concerns in business operations and

in interactions with stakeholders .’(Woodward-Clyde,1999) defined CSR as ‘CSR has been

defined as a ‘contract’ between society and business wherein a community grants a company

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a license to operate and in return the matter meets certain obligations and behaves in an

acceptable manner’ (UK Government, 2001) defines CSR as ‘corporate social responsibility

recognizes that the private sector's wider commercial interests require it to manage its impact

on society and the environment in the widest sense. This requires it to establish an

appropriate dialogue or partnership with relevant stakeholders, be they employees, customers,

investors, suppliers or communities. CSR goes beyond legal obligations, involving voluntary,

private sector-led engagement, which reflects the priorities and characteristics of each

business as well as sectoral and local factors. ‘From the stakeholder, social, environmental

dimension (Frederick et al. ,1992) defines CSR as ‘Corporate social responsibility can be

defined as a principle stating that corporations should be accountable for the effects of any of

their actions on their community and environment’.(Foran , 2001 ) defined CSR ‘as the set of

practices and behaviours that firms adopt towards their labour force, towards the environment

in which their operations are embedded, towards authority and towards civil society’.

(Andersen,2003) defines ‘corporate social responsibility broadly to be about extending the

immediate interest from oneself to include one's fellow citizens and the society one is living

in and is a part of today, acting with respect for the future generation and

nature’.(Commission of the European Communities , 2001) defines CSR as ‘ Corporate

social responsibility is essentially a concept whereby companies decide voluntarily to

contribute to a better society and a cleaner environment’. From stakeholder, social and

economic dimension (World Business Council for Sustainable Development,1999) defines

CSR as ‘ The commitment of business to contribute to sustainable economic development,

working with employees, their families, the local community and society at large to improve

their quality of life.’ From social, environmental and economic dimensions (Strategies,2003)

defines CSR as ‘ CSR is generally seen as the business contribution to sustainable

development, which has been defined as development that meets the needs of the present

without compromising the ability of future generations to meet their own needs, and is

generally understood as focussing on how to achieve the integration of economic,

environmental and social imperatives’.(Marsden,2001) defines CSR as ‘Corporate social

responsibility (CSR) is about the core behaviour of companies and the responsibility for their

total impact on the societies in which they operate. CSR is not an optional add-on nor is it an

act of philanthropy. A socially responsible corporation is one that runs a profitable business

that takes account of all the positive and negative environmental, social and economic effects

it has on society’. From stakeholder, social, environmental and economic perspective (Van

Marrewijk , 2001) defines CSR as ‘Companies with a CSR strategy integrate social and

5

environmental concerns in their business operations and in their interactions with their

stakeholders and demonstrate openly their triple P performances’. (Lea,2002 ) defines CSR as

‘ CSR can be roughly defined as the integration of social and environmental concerns in

business operations, including dealings with stakeholders’. (IndianNGOs.com ,2003) defines

CSR as ‘Corporate social responsibility is a business process wherein the institution and the

individuals within are sensitive and careful about the direct and indirect effect of their work

on internal and external communities, nature and the outside world.’(Ethical Performance,

2003) defines CSR as ‘At its best, CSR is defined as the responsibility of a company for the

totality of its impact, with a need to embed society’s values into its core operations as well as

into its treatment of its social and physical environment. Responsibility is accepted as

encompassing a spectrum – from the running of a profitable business to the health and safety

of staff and the impact on the societies in which a company operates.’(Ethics in Action

Awards , 2003) defines ‘CSR as CSR is a term describing a company’s obligation to be

accountable to all of its stakeholders in all its operations and activities. Socially responsible

companies consider the full scope of their impact on communities and the environment when

making decisions, balancing the needs of stakeholders with their need to make a profit’.

(Khoury et al., 1999) Corporate social responsibility is the overall relationship of the

corporation with all of its stakeholders. These include customers, employees, communities,

owners/investors, government, suppliers and competitors. Elements of social responsibility

include investment in community outreach, employee relations, creation and maintenance of

employment, environmental stewardship and financial performance. From Voluntariness,

Stakeholder, Social and Environmental dimension (IBLF ,2003) defines CSR as ‘Open and

transparent business practices based on ethical values and respect for employees,

communities and the environment, which will contribute to sustainable business

success’.(Business for Social Responsibility, 2000) defines CSR as ‘ operating a business in a

manner that meets or exceeds the ethical, legal, commercial and public expectations that

society has of business. Social responsibility is a guiding principle for every decision made

and in every area of a business’.(Commission of the Communities,2003 ) defines CSR as

‘CSR is the concept that an enterprise is European accountable for its impact on all relevant

stakeholders. It is the continuing commitment by business to behave fairly and responsibly

and contribute to economic development while improving the quality of life of the work force

and their families as well as of the local community and society at large.’ (CSRwire, 2003)

defines CSR as CSR is defined as the integration of business operations and values, whereby

the interests of all stakeholders including investors, customers, employees and the

6

environment are reflected in the company’s policies and actions.’(Hopkins, 1998 ) defines

CSR as ‘Corporate social responsibility is concerned with treating the stakeholders of the

firm ethically or in a socially responsible manner. Stakeholders exist both within a firm and

outside. Consequently, behaving socially responsibly will increase the human development of

stakeholders both within and outside the corporation.’(Lea, 2002) defines CSR as ‘CSR is

about businesses and other organizations going beyond the legal obligations to manage the

impact they have on the environment and society. In particular, this could include how

organizations interact with their employees, suppliers, customers and the communities in

which they operate, as well as the extent they attempt to protect the environment.’ From the

voluntariness perspective (Kilcullen & Kooistra,1999) defines CSR as ‘CSR is the degree of

moral obligation that may be ascribed to corporations beyond simple obedience to the laws of

the state’. From social perspective (McWilliams & Siegel, 2001) defines CSR as ‘Actions

that appear to further some social good, beyond the interests of the firm and that which is

required by law.’(Jones ,1980 ) defines CSR as ‘the notion that corporations have an

obligation to constituent groups in society other than stockholders and beyond that prescribed

by law or union contract, indicating that a stake may go beyond mere ownership’

3.3 Components of CSR

General Components of CSR are discussed below:

1. Employees

The treatment of employees by large corporations has often come under scrutiny by political

organizations and human rights groups. Particularly in developing countries, where many

resource extraction industries have extensive operations, there are ongoing questions about

just how equitable working conditions and pay levels are. CSR seeks to assist corporations in

treating both domestic and foreign employees equitably by providing safe and comfortable

working conditions and a fair wage. This approach continues the ongoing transformation of a

corporate mentality that was common in the nineteenth century, in which the rights of

employees barely registered among the concerns of company owners.

2. Customers

Corporations have an obligation to provide safe, effective and good-quality products and

services to their customers. A purely free-market analysis of this responsibility would state

that these requirements will be met by the dictates of the market. The philosophy of CSR

questions the truth of this belief, and advocates more proactive intervention into the

7

relationship between corporations and their customers. Consumer protection initiatives, such

as those advocated by Ralph Nader, help to provide the legal backing under which consumers

can challenge what they see as questionable practices on the part of corporations.

3. Environment

Growing public awareness of environmental challenges involving toxins, resource depletion

and climate change is forcing corporations to reconsider the traditional corporate view of the

natural world as an unending cornucopia of resources. Environmental aspects of CSR

encourage corporations to consider the finite nature of the natural world, and to take much

more stringent measures to reduce waste, address polluting or destructive practices and

integrate alternative energy systems and innovative waste-reduction programs. This shift in

attitude is particularly critical in areas of South America and Africa, where corporations have

extensive operations but are not subject to strict oversight and regulation.

4. Society

In addition to their responsibilities to employees, customers and the natural world,

corporations are responsible for their impact on human society. Many millions of people who

are not employed by a corporation and who do not purchase its products are nevertheless

affected by its activities. CSR recognizes the interrelated nature of society, and acknowledges

that no individual or company can exist totally isolated from the rest of society. Therefore,

corporations need to critically analyze what impact their activities have, for good or ill, on

surrounding communities, and take steps to maximize the good and minimize the ill.

Farther additions of component analysis include, Archie. Carroll’s paper “The Pyramid of

Corporate Social Responsibility: Toward the Moral Management of Organizational

Stakeholders” published in Business Horizons, July-August 1991. In that analysis

components or levels of CSR are divided in four –

A. Economic Component

Economic Components of CSR include, maximizing the profit of the company as possible, as

a part of its goal to exist and meet the external and internal shareholders demand. It is

important to be committed to being as profitable as possible and a successful firm be defined

as one that is consistently profitable. The firm must be operated with high level of efficiency

and must in a run to achieve competitive position in the related industry/market.

8

B. Legal Component

Laws exist within the marketplace, and they govern how corporations are to conduct their

business affairs. Competition with other businesses, regulation of taxes and employment laws

are but a few areas of legal responsibility where corporations are expected to adhere to the

laws. These laws and standards are established nationally and locally.

Organization is in a position to abide both local and other country’s law if operation is

handled there. Local and federal laws must be distinguished in practice. It is important to be a

law-abiding corporate citizen. A successful firm is defined as one that fulfills its legal

obligations and invokes to be good corporate-citizen. It is important to provide goods and

services that at least meet minimal legal requirements.

C. Ethical Component

Organization, as a part of CSR practice should perform in a manner consistent with

expectations of societal mores and ethical norms. It must recognize and respect new or

evolving ethical moral norms adopted by society. It is important for company to prevent,

ethical norms from being compromised in order to achieve corporate goals. It is accept that

good corporate citizenship be defined as doing what is expected morally or ethically. Ethical

practice also includes recognizing that corporate integrity and ethical behavior go beyond

mere compliance with laws and regulations.

D. Philanthropic Component

Corporations are not just economic entities -- they're also considered functioning members of

a society. Firms are to perform in a manner consistent with the philanthropic and charitable

expectations of society. Part of philanthropic efforts also includes assisting the fine and

performing arts. It is important that managers and employees participate in voluntary and

charitable activities within their local communities. Philanthropic effort also means to

provide assistance to private and public educational institutions. It is important to assist

voluntarily those projects that enhance a community’s "quality of life."

9

Chapter 3: Theoretical Model and Hypothesis

3.1 Various Theories

From study, it is observed that, Corporate Social Responsibility or CSR is an integral part or ‘subset’

of Corporate Governance Practice. Thus, theories of CSR are almost same or overlapped with those of

Corporate Governance.

Here, general and mostly discussed Theories of Corporate Social Responsibility are described

Agency Theory

An agency, in general terms, is the relationship between two parties, where one is a principal

and the other is an agent who represents the principal in transactions with a third party.

Agency relationships occur when the principals hire the agent to perform a service on the

principals' behalf. Principals commonly delegate decision-making authority to the agents.

Agency problems can arise because of inefficiencies and incomplete information. In finance,

two important agency relationships are those between stockholders and managers, and

stockholders and creditors. Agency theory is developed as framework for analyzing

conflicting interests between key stakeholders, in addition to the development of mechanisms

for resolving conflicts (Tipuric, 2008). Besides prevalent contribution within discipline of

corporate governance, agency theory application is extensive: agency theory may be applied

in every situation in which one party (the principal) delegates work to another (the agent),

who performs that work. Agency theory attempts to describe the relationship in terms of

behavioral characteristics and provides mathematic instrument for evaluating situations

between parties who lack mutual trust. Intellectual foundation for agency theory development

was in the work of Coase along with Alchian and Demsetz. Incentive for agency theory

development was relationship between ownership and control function within large

corporations. Pioneers, Jensen and Meckling, tried to verify that corporations do not operate

according to the maximization principle, mainly because of the conflicting interests of major

governing parties (Jensen & Meckling, 1976). Agency theory describes economic exchange

relation between principal and agent. Principal-agent relation, in which principal delegates

work to the agent, is described using the metaphor of a contract (Jensen & Meckling, 1976).

Agency theory objective is to determine optimal contract between principal and agent. Agent

(manager or employee) tries to maximize personal gains by satisfying principal's economic

objectives and agent's commitment level is function of perceived reward value for satisfying

principal's objectives.In situation when principal delegates work to the agent, agency

relationship develops. Agent's mission is to optimally accomplish principal's interests. In

10

pursuit of the mission, the agent chooses way of doing business which results in certain

effects. Principal bears a risk of eventual failure, but also adopts effects of agent's execution

of mission reduced for agreed payment to the agent. Level of reward to the agent usually

depends on principal's interest in realization of the assigned mission. A benefit, to the agent,

in the form of reward represents cost to the principal while agent's effort brings benefits to

the principal (with an assumption that higher effort is directly related to better results), and at

the same time cost to the agent(Eisenhardt,1989).Relationship between principal and agent

based on the contract is a focal point of agency theory. Principal wants to maximize his/her

benefits while minimizing reward to the agent at the same time. On the other hand, the agent

wants to maximize his/her benefits. Agency theory assumes that principal's wealth, per se,

would not be maximized because agent and principal: (1) have different goals, (2) have

different access to information (principal cannot monitor what agent does and know which

information agent has), and (3) different propensity towards risk.

Critics of Agency Theory

(Donaldson, 1990) criticized the agency theory dominance in terms of methodology

individualism, narrow-defined motivation model, regressive simplification, disregarding

other research, ideological framework, organizational economics and corporate governance's

defensiveness. Focus of agency theory's studies is individual consistent with rational,

economic model of human behavior. However, absolute explication of every organizational

activity should not be considered as equivalent to individual activity and that represents

essential critic of structuralism. It is extremely important to stress that Williamson's axiom

about opportunistic agent's behavior over time has gained many different forms and

interpretations. (Williamson ,1985) identified opportunistic behavior of the minority of

individuals, the not majority. "Individual sometimes acts opportunistically and

trustworthiness is hardly ex ante transparent. Therefore, it is compulsory to conduct ex ante

screening and develop ex post assurance mechanisms or, in contrary, opportunistic individual

will exploit circumstances towards less opportunistic individual." Since organizations cannot

completely identify and eliminate opportunism, the fundamental proposition is that

opportunism is possible and therefore control mechanisms are initiated. However, it is

important to stress out that even in circumstances of highly specific assets, where the

probability of opportunism is extremely high, there are individuals who will give priority to

cooperation and trust and will not initiate opportunistic behavior (Hill, 1990).Donaldson

(1990) had an interesting observation that all of organizational economics' academics (Jensen

11

and Meckling, Barney and Ouchi ...) paid no attention to the organizational behavior research

Traditional management theory as well recognizes managerial errors, but not as calculated

actions, but as a result of information insufficiency, knowledge shortage or as a group

thinking effect. Proponents of agency theory state that control mechanisms are obligatory for

directing opportunistic managerial behavior, although empirical researches confirm that

control generates stronger individualistic behavior, reduces proactive organizational behavior

and trustworthiness, and lastly results with distrust (Podrug, 2010). Agency theory is not

normative theory. Agency theory's predictive strength lies in description of the situations

where parties act rationally, focusing on their personal interest, with risk aversion or unbiased

towards risk. Goals' divergences, divergence in attitude towards risk and information

decentralizations are agency theory fundaments. If these assumptions about conflict interests

and information asymmetry are allayed, then agency problem becomes trivial and

scientifically not interesting. In circumstances of equal information approach, principal would

easily define and control agent's behavior and fittingly compensate agent. If principal and

agent have matching interests, then agent's motivation is not unclear (Tipuric,

2008).Analyzing phenomena only within agency theory framework may result in: 1)

disregarding of principal's obligation towards agent; 2) ignoring distrust development and

disrespect of agents; 3) neglecting ethical aspects and 4) overlooking of prospective solutions

consistent with ethical norms. From corporate governance perspective, successful resolution

of agency problem (if possible) significantly reduces potential and validity of agency theory

in analysis of governing relations, leaving opportunity for application of stewardship theory

and other organizational theories. There are a number of limitations of agency theory

(Eisenhardt 1989; Shleifer and Vishny 1997; Daily et al. 2003): Agency theory assumes

complete contracts (i.e. contracts that cater for all possible contingencies such as ambiguities

in language, inadvertence, unforeseen circumstances, disputes, etc). Bounded rationality does

not allow for complete and efficient contracts. Information asymmetries, transaction costs

and fraud are insurmountable obstacles to efficient contracting. Agency theory assumes that

contracting can eliminate agency costs. The many imperfections in the market indicate that

this assumption is not valid. Third party effects are not recognised. Third parties are those

affected by the contract but who are not party to the contract. Many boards are conscious of

third party effects and adopt social as well as financial responsibilities. Thus, whereas

Maximum economic efficiency may (theoretically) be achieved under agency theory, it will

not achieve maximum social welfare. Shareholders are assumed to be only interested in

financial performance. Directors and management are assumed to owe their duty to

12

shareholders. The law requires that duty to be owed to companies. Boards have a number of

roles. Agency theory may be suitable for the monitoring-of-managers role of boards, but it

does not explain the other roles of boards. Agency theory is not informative with respect to

directors resources, services and strategy roles. Much of the corporate governance research is

conceptualised as deterrents to managerial self-interest. Agency theory treats managers as

opportunistic, motivated solely by self-interest. Many would argue that this theory does not

capture those who are loyal to their firms. Agency theory does not take account of

competence. Thus, if even incompetent managers are honest (or are made honest by board

control) they will still be limited in their ability to meet shareholder objectives. It is not

enough to incentivise people to get a task done; they must have the ability to carry out the

task.

Stakeholder Theory

Basically, stakeholder theory is an organizational management theory that complies with

accepted business ethics addressing values and morals in the management of an organization

(Phillips & Freeman, 2003). This theory was emphatically propounded initially by Edward

Freeman in his book, “Strategic Management: A Stakeholder Approach”. He identified the

groups that are considered as stakeholders in any business entity or corporation. He also

described the various models of the groups and presented recommendations to the

management to give adequate regard and respect to the interests of all these groups (Freeman,

1984). Traditionally, the shareholders of an organization were considered as the main

stakeholders. Later this principle was expanded to include investors, employees, customers,

and suppliers as the four major stakeholders of a company. However, the modern stakeholder

theory rightly points out that several other groups such as banks that provide finance to the

company, trade unions, governmental bodies such as tax authorities and company law

regulators, political groups, associated corporations, and various communities with which the

company interacts are all stakeholders in a company. For example, it is not possible for any

organization to conduct its business in the present market conditions without seeking loans

and other financial assistance from banks. As such, it is quite obvious that banks are major

stakeholders in any organization with strong interests in the growth of the company.

The foremost stakeholders of an organization are the private owners or the shareholders of

the entity. Their main interests are profits, along with future performance and direction of the

company. The senior management of the company concentrates on targets and objectives,

13

performance and growth. The non-managerial employees are concerned with job security and

adequate remuneration. The customers or clients of the company look for value and quality of

the products or services of the company. They also expect the company to provide required

level of customer care and follow ethical practices in dealing with them such as fair pricing.

Suppliers are expected to provide quality products or services at reasonable prices so that the

end products satisfy the customers of the company. The trade unions ensure that the

minimum wages, working conditions, and legal requirements of employment are fulfilled

according to accepted social norms and government regulations. The community is interested

in the number of jobs created by the company, the safe and effective handling of

environmental issues by the organization, the involvement of the company in betterment of

the community, and the appreciation in the value of shares held by the community. The

banks, financial institutions and other lenders to the company closely observe the present

profits of the company, future risks, liquidity, credit scores, new business opportunities and

contracts of the company for steady growth, and other company development-related

factors.The stakeholder theory integrates the resource-based viewpoint with the market-based

viewpoint, while also adding social and political factors. The normative base of stakeholder

theory is its main core, since identification of all moral and philosophical guidelines that are

required for the management and successful operation of the company are included in this. In

the above theory, eight types of stakeholders had been specifically identified as having

influence on any organization. They are investors, suppliers, employees, customers, trade

associations, governments, political groups, and communities (Donaldson & Preston, 1995).

However, it is interesting to note that the banking sector, which is generally accepted as a

major stakeholder in the functioning of any organization had not been directly included or

mentioned in the above description. Hence, additional explanations to make this theory more

comprehensive had been necessitated. From the above point of view, this theory had been

further expanded to include three major attributes, namely power, urgency, and legitimacy

that decide the relationship of all the above stakeholders to the company. The power of the

stakeholders is the means or the power to impose their will on an organization due to their

various levels of relationship with the company. The urgency is the criticality or time

sensitivity of the claims of the stakeholders. The legitimacy is the socially expected and

accepted behaviors, structures, and norms that the company should follow to serve the

interests of the stakeholders in the best possible manner (Mitchell, et al, 1997). Since banks

are the major contributors of finance for running an organization, all the above three factors

of power, urgency, and legitimacy play an important role in their interests and influence on

14

the organization. The stakeholder theory as brought out by Freeman consists of five major

themes. They are definition and salience of stakeholders, actions and responses of

stakeholders, actions and responses of the company, performance of the company, and

debates on stakeholder theory and its validity. The stakeholder theory of Freeman had been

steadily getting prominence since 1995. There had been a substantial rise in both proponents

and detractors of this theory. The proponents point out that only shareholders cannot be

considered as stakeholders, since the interests of several other groups also have strong

interests in the performance of an organization. On the other hand, the detractors of this

theory argue that the stakeholder theory of Freeman undermines the principle of wealth

maximization of the shareholders, which is the most fundamental goal or objective of any

business. One of the major opponents of stakeholder theory is Charles Blattberg. He argues

that the stakeholder theory mainly consists of balancing or compromising the interests of

various stakeholders, which is not a full solution. He proposes a ‘patriotic’ conceptual

approach by an organization as an effective option to the stakeholder theory (Blattberg,

2004). Blattberg substitutes conversation as the right alternative to the negotiation theory of

Freeman while dealing with conflicts among various stakeholder interests. In spite of the

forceful arguments of Blattberg, this new theory does not make any major contribution to the

fundamental values of the stakeholder theory of Freeman. Banks are major financial

contributors to any company and they have to negotiate different terms and conditions if any

conflict of interest arises between their interests and the company performance. Mere

conversation cannot solve the problem. Proper negotiation and modification of the terms of

lending alone can provide proper solution to the situation.

Conflicts of Interests and Application of Stakeholder Theory

To arrive at a decision about the significance of stakeholder theory, we have to clearly

understand the validity of stakeholder theory and the extent to which it can be applied to an

organization. For this purpose, the stakeholders can be classified as primary stakeholders and

secondary stakeholders. The interests of the company are decided by its relationship to these

two types of stakeholders. The major objective of the company is to enhance its economic

strength and increase the profits. The stakeholders also have the same interest but they are

also keen on how the created wealth is distributed among the various groups of stakeholders.

This is where the struggle starts between the different parties. The shareholders can demand

that higher dividends be declared to them when profits increase. The government may

intervene and decide on different tax structures for various sets of income levels. The

15

employees can expect and fight for higher wages. The society can express that the company

utilize a portion of the profits for the betterment of the communities from which the company

is receiving its profits and fulfill its social obligations. The banks can increase the interest

rates to benefit from the higher profits of the company. The different demands or

expectations from the various stakeholders can easily create conflict and the company

management might find it very hard to satisfy all of them. This is where the stakeholder

theory helps an organization in balancing and compromising all these contradictory interests.

Organizations are forced to explore contentious relationships and conflicts of interests among

the stakeholders. They should identify compatible and incompatible interests and introduce

contingency procedures to examine and solve these conflicting interests. Stewardship Theory:

Main Tenets and Assumptions. Stewardship Theory has been framed as the organizational

behavior counterweight to rational action theories of management (Donaldson and Davis,

1991 & 1993). This theory holds that there is no conflict of interest between managers and

owners, and that the goal of governance is, precisely, to find the mechanisms and structure

that facilitate the most effective coordination between the two parties (Donaldson, 1990).

Stewardship Theory holds that there is no inherent problem of executive control, meaning

that organizational managers tend to be benign in their actions (Donaldson, 2008). The

essential assumption underlying the prescriptions of Stewardship Theory is that the behaviors

of the manager are aligned with the interests of the principals. Stewardship Theory places

greater value on goal convergence among the parties involved in corporate governance than

on the agent’s self-interest (Van Slyke, 2006). The economic benefit for the principal in a

principal-steward relationship results from lower transaction costs associated with the lower

need for economic incentives and monitoring. Researchers, in general, have tended to ignore

the principal as the agent and have overemphasized the role of the manager as the agent.The

‘model of man’ in Stewardship Theory is someone whose behavior is ordered such that

proorganizational behaviors have higher utility than individualistic behaviors (Davis et al.,

1997).This model of man is rational as well, but perceives greater utility in cooperative

behaviors than in self-serving behaviors. A steward’s utility function is maximized when the

shareholders’ wealth is maximized. The steward perceives that the utility gained from interest

alignment and collaborative behavior with the principal is higher than the utility that can be

gained through individualistic, self-serving behaviors (Davis et al., 1997). Stewards are

motivated by intrinsic rewards, such as reciprocity and mission alignment, rather than solely

extrinsic rewards. The steward, as opposed to the agent, places greater value on collective

rather than individual goals; the steward understands the success of the company as his own

16

achievement. Therefore, the major difference between both theories is on the nature of

motivation. Agency Theory places more emphasis on extrinsic motivation, while Stewardship

Theory is focused on intrinsic rewards that are not easily quantified, such as growth,

achievement, and duty.Stewardship Theory is mainly concerned with identifying the

situations in which the interests of the principal and the steward are. According to this theory,

there are situational and psychological factors that predispose individuals to become agents or

stewards. On the one hand, there are situational factors that influence the executive to become

a steward. These situational factors refer to the surrounding cultural context, rather than to an

organization’s work environment. Some of the situational factors that predispose an

individual towards stewardship are working in an involvement-oriented management system,

as opposed to a control-oriented management system; a collectivistic culture, as opposed to

an individualistic one; a low-power distance culture; or when corporate governance structures

give them authority and discretion (Donaldson and Davis, 1991). On the other hand, there are

psychological factors that predispose the executive to become a steward. Some of these

factors include having higher-order motivations, better disposition to identify with the

objectives of the firm, value commitment orientation, and greater use of personal power as a

basis to influence others To sum up, the psychological and situational characteristics of the

principal and the manager are antecedents for their rational choice between agency or

stewardship relationships The process through which the parties decide to be agents or

stewards can be synthesized as follows: First, this is a decision made by both parties of the

relationship. Second, the psychological characteristics and the cultural background of each

party predispose the individuals to make a particular choice. And finally, the expectation that

each party has about the other will influence the choice between agency or stewardship

relationships. Donaldson et al., (1990) remain silent, however, about the specific interactions

of antecedents in the prediction of Stewardship versus Agency Theory. When the factors that

surround the individual, both psychological and situational, are aligned to make him decide to

be a steward or agent, the situation is clear as there is no conflict inside the person. The

problem arises when there are conflicting forces between the psychological and the

situational factors. For instance, some of the psychological attributes of the individual may

predispose him to become an agent - such as when the manager is solely motivated by

extrinsic motives - whereas situational mechanisms such as empowerment management

systems orient him to become a steward. This mismatch between the management philosophy

of the company and the psychological characteristics of the manager remains rather

unexplored under current Stewardship Theory. In the existing literature on Stewardship

17

Theory it is not evident which are the underlying mechanisms that make an individual opt for

one position or the other, what sort of situational factors if any can influence the person to

transcend his own self-interest, and how the individual resolves his internal inter-motivational

conflict. This paper contributes to the explanation of how to resolve the dilemma of

conflicting factors within the agent. Another point that needs further exploration in

Stewardship Theory is the assumption that becoming a steward or an agent is the result of a

rational process. In this rational process, the individual evaluates the pros and cons of one

position versus the other. For instance, there are contributions in stewardship literature that

argue that stewards are not altruistic, but that there are situations where executives perceive

that serving shareholders’ interests also serves their own interests (Lane et al., 1998). In this

situation, agents would recognize that the company’s performance directly impacts

perceptions of their individual performance. In other words, in being effective stewards of the

organization, they also manage their own careers (Daily et al., 2003). This underlying

argument raises an important question: How can an individual rationally decide whether his

nature is that of a steward or an agent? What role does motivation play in this picture? I

believe there is still a lot of work to do in terms of the underlying assumptions and

mechanisms that define the Stewardship Theory, and further theoretical perspectives are

needed to help to explain its predictions.

Moral Obligation Theory

Over time, many ethical theories have developed. Ethical theories can be separated into two

main categories: one category includes theories of the good the other category includes

theories of the right. The distinction between these two categories is that theories of the good

attempt to explain what is worthwhile in life, while theories of the right explain what a

morally correct course of action is. Both of these categories can be divided into sub

categories.

18

Figure 3 .1 :Moral Obligation Theory

Theories of the Good

Theories of the good attempt to explain what is worthwhile in life,such as beauty, justice, or

human happiness. Two types of theories of the good include theories of welfare and the will

of a deity. Deist theories of the good suggest that what is good or worthwhile is what God,

gods, or deity, whatever the case may be, say(s) is good, even if it is harmful to life. Welfare

theories of the good suggest that what is good promotes the welfare of life, as opposed to

what a deity says. Welfare theories of the good can be broken further into two more

categories: experiential and non-experiential. An experiential theory argues that good is

pleasurable which is known from prior experiences; this theory is also known as pleasure

theory, or hedonism. A non-experiential theory suggests that what is desired is good;

nonexperiential theory is also called desire theory. Even though something is desired, it does

not mean that it is pleasurable. However, the fulfillment of desires is what nonexperiential

theories account for

MORAL THEORY

THEOTY OF RIGHT

THEORY OF WRONG

19

Figure3.1 2 :Theories of the Good

It is also important to note the difference between intrinsic good and extrinsic, or

instrumental good. The intrinsically good are concepts which are good in and of themselves

and not for any other reason or for what they achieve. For example, the pleasure theory

argues that the only good in and of itself is pleasure. However, several instrumental goods

can be used to achieve pleasure, such as food, working out, and leisure activities, but food,

working out, and leisure activities are not good in themselves because they are only

instruments to achieving pleasure, and to some, may not bring pleasure at all. The distinction

between the two can easily be understood as the difference between the means and the ends.

The means are the instrumentally good things, and the end is the intrinsic good.

Theories of the Right

Theories of the right, as opposed to the good, describe actions that should be taken that are in

accordance to a general rule. There are two major categories of these types of theories:

teleological and deontological. Teleological theories apply a general rule that should be

followed to all possible courses of action and determine morality based on the end result of

that action. However, under a teleological theory, one action could be considered moral and

Theories of the Good

Welfare

Preferences

Experiential(Pleasure)Non-

experiential(Desire)

Ideals

Deity’s Will

20

immoral at different times under different circumstances. For example, lying may be

justifiable and the right thing to do under certain circumstances, and morally bad in other

circumstances. Most teleological theories are considered consequentialist. Conversely,

deontological theories describe actions which are always good or always bad; they usually

construct a set of rules for morally right and morally wrong courses of action. Deontological

theories judge actions based on the means, not on the ends. Some examples of teleological

theories are ethical hedonism, utilitarianism, virtue, and welfarism, each of which apply a

different rule to certain actions. Examples of deontological theories include universalized

duty, rights, theism, and existentialist subjectivism.

Figure 1.1 3 : Theories of the Right

Theories of the Right

Teleological

•Ethical Hedonism

•Utilitarianism

•Virtue

•Welfarism

Deontological

•Universalized Duty

•Theism

•Existentialist

21

3.2 Conceptual Framework

In this study, the strength of the relationship between corporate social responsibility and

financial performance is tested. In addition the relationship between firm size and CSR

activities are tested .To test the above relationship we declare variables as follow:

3.3 Research hypothesis:

Table 3.3: Research hypothesis:

Hypothesis No. Hypothesis

Hypothesis 1 H01: There is no significant relationship between the levels of bank

(CSR) and the bank’s (CFP).

Vs

H11: There is no significant relationship between the levels of bank

(CSR) and the bank’s (CFP).

Hypothesis 2 H02: There is no significant relationship between bank size and CSR

Vs

H12: There is significant relationship between bank size and CSR

Hypothesis 3

H03: The Bank does not use any structured guideline in CSR

Vs

H13: The Bank uses structured guideline in CSR

CSR Financial

performance

Size OF the Bank CSR Activities

Independent

Variables

Dependent

Variables

Figure 3.2 1 Conceptual Framework

22

Chapter 4: Methodology

4.1 Research design:

This research is trying to find out the impact of (CSR) on financial performance in context of

Premier Bank, Bangladesh. At the same time this research paper will also try to find out if

Bank size has any affect on CRP. This research is mainly a descriptive study because it will

try to find out the association between variables. The time dimension for collecting research

data is longitudinal and cross sectional

4.2 Data

The study is purely based on the information collected from primary and secondary sources.

The primary sources are Structured, semi-structured and unstructured interview of concerned

officials of the “THE PREMIER BANK LTD’.

Secondary data are collected from the following sources-

Annual Reports

Banks’ websites

Bangladesh Bank’s Publications

Newspapers

4.3 Population and Sample

Population of the study is all the banks operated in Bangladesh.

The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4

State Owned Commercial Banks (SCB), 5 government owned specialized banks, 30 domestic

private banks, 9 foreign banks. Sample size of this study is just 1 bank named Premier Bank

Ltd Bangladesh from which I have collected 4 Years data.

Microsoft Excel 2007( especially Data analysis add-on) has been used as the statistical data

analysis tool. This software helped to carry on different types of analysis for this research.

Regression model has been used to know how well the independent variables are explaining

the dependent variable and whether the null hypothesis can be rejected or not. Pivot analysis

is also used excessively in this study.

4.4 Reliability, Validity and Generalizability

The study is reliable in the context that – the questionnaire was presented and filled by responsible

officers, in front of the interviewer. Though the questionnaire was not fully answered or filled by the

interviewee, it was completed based on their descriptive and indirect answers for those questions.

23

Then after completion, the entire questionnaire was presented to check if any objection or correction

is going to be applied for the questionnaire.

The data given by the company is considered valid because, multiple sources and personnel was

inquired for data collection to collect most accurate data. Indirect and conversational approach was

used to get answers of critical questions.

Indirect Data collected from personnel or sources are decrypted in demanded terms and converted into

general concept, accepted and standard for business world practices.

4.5 Ethical Stance

No hidden record of conversation was acquired for further use, and no unauthorized data was used for

survey purpose. Complete survey questionnaire was presented in front of the officers to ensure that –

no unwanted and confidential data is expressed against the firm.

As for the interviewer, of small amount but accurate and verified data is used for survey purpose, by

physical presence which is possible to be verified.

24

Chapter 5: Analysis, Findings and Discussions

The Premier Bank Ltd. Claims that it views corporate social responsibility from the following

five dimensions:

1. Economic responsibility - to earn profit for owners

2. Legal responsibility - to comply with the law (society's codification of right

and wrong)

3. Ethical responsibility - not acting just for profit but doing what is right, just

and fair

4. Voluntary and philanthropic - promoting human welfare and goodwill

5. Being a good corporate citizen : contributing to the community and the quality

of life

5.1 Economic responsibility

Premier Bank Ltd strongly believes that it creates more values for our shareholders with a

good return on their investment and is committed to protect their long-term interest. In its

annual report 2010, it asserts as follow “We are aware to maintain our financials and ratios

stronger and better than industry standard. (Annual Report, 2010)”

Figure 2 5.1 Economic responsibility

25

5.2 Legal responsibility - to comply with the Laws, Rules and

Regulations The Bank claims that it complies with all regulatory requirements in all its operations and

conducts its business within a well-framed control supported by bundle of policy statements,

written procedures & manuals. The Bank asserts it ensures Corporate Governance practices at

all levels which enable it to establish professionalism together with trust and confidence

among the interested parties, builds capacity to operate business efficiency and creates a

congenial working environment inevitable to meet the challenges of the present competitive

business arena. It believes that financial information is prepared as per financial accounting

policies in line with the International Financial Reporting Standard and best financial

reporting practices in the country and public disclosure policy of material information has

been adopted in accordance with the requirement as set out in legislation and in the rules and

regulations of SEC, DSE and other applicable laws. Nonetheless premier bank have faced

some legal issue such as conflict with tax authority about determining tax, investing in capital

market more than limit set by Bangladesh Bank etc.

Table 5.1 1Conflict with NRB

Year Assessment Year Status

2001 2002-2003 Assessment completed



2004 2005-2006 Appeal filed with High Court


2006 2007-2008 Appeal filed with High Court

2007 2008-2009 Appeal pending with Tribunal

2008 2009-2010 Appeal filed hearing continue

2009 2010-2011 Appeal filed

2010 2011-2012 Appeal filed

2011 2012-2013 Return submitted.

2012 2013-2014 Return submitted.

26

5.3 Ethical responsibility

Premier Bank believes it tries to ensure high level of transparency and accountability in all its

business transactions and ethical responsibility at every stage is significant to carry out its

duties. It claims its solemn promise is to transact banking business in a confidential &

professional manner. It asserts that it respect the views and opinions of others; their dignity.

5.4 Voluntary and philanthropic

Figure 5.4 Voluntary and philanthropic

৳ 9.00 ৳ 21.00

৳ 58.27

৳ 125.48

৳ -

৳ 20.00

৳ 40.00

৳ 60.00

৳ 80.00

৳ 100.00

৳ 120.00

৳ 140.00

2010 2011 2012 2013

CSR

Exp

en

se

Mill

ion

s

CSR Expenditure Growth

Total

27

Table 5.4: Investment on CSR

Year Investment on CSR

2010 9000000

2011 21000000

2012 58265000

2013 125475100

Grand

Total

213740100

From 2010 to 2014, It contributed Taka 213740100 through donations and charities program,

primarily directed towards health care, social welfare, supporting educational institutions,

research studies, sports d to ensure the less privileged a more secure future.

5.5 CSR activities of Premier Bank from 2010 to 2013

The following table highlights the CSR expenditure of Premier Bank at a glance

Table 5.5 CSR expenditure of Premier Bank at a glance

sectors year Activities

Sum of

Investment on

CSR

Disaster

Relief

76680000

2011

9100000

Distribution of warm clothes among the poor people to assuage

their sufferings from cold wave in winter 9100000

2012

29580000

Contribution in Disaster Management (prime minister fund) 20000000

Distribution of Warm Clothes among the winter hit poor

people 9100000

financial assistance for the bereaved family members of BDR

Tragedy 480000

2013

38000000

28

A donation for Tk. 10.00

million to Prime Minister Relief Fund for Savar

Rana Plaza Tragedy. 10000000

Distribution of Warm Clothes among the winter hit poor

people 17520000

Ms. Sonia Hasan as BDR victim 480000

The Bank donated to Prime Minister Relief Fund an amount of

Tk. 10.00 million 10000000

Education

62565000

2010

285000

A. K. High school 100000

Barishal Degree College 100000

Kalkini High School 25000

Rahim Uddin High Scool 60000

2012

680000

G. K. High school 100000

Kashemia Dalilia Yatimkhana 140000

Pingri High School 100000

Rajanpur Degree College 120000

Rajapur Pilot High School 120000

Shaheed Raja Degree College 100000

2013

61600000

Gopalgonj Zila Samity for Scholarship 1000000

Monoshita Mohila Mohabiddyaloy

Monsur Uddin Mohila College 500000

Tofazzal Hossain Degree College 100000

Z. Rahman Premier Bank School & College, Banshgari,

Bhairab, Kishoregonj 60000000

Environment

250000

2012

250000

Bangladesh Banno Prani Seba 100000

Sponsoring of PDF summer challenge 150000

health and

21395000

29

Safety

2010

285000

Financial assistance to Mr. Arifur Ali for treatment of cancer

disease 200000

Mr. Rafique for treatment. 25000

Mrs. Rubina Begum for treatment. 60000

2011

575000

Financial assistance to Mr. A. S. M. Abdur Rob for treatment 75000

Financial assistance to Mrs. Taslima Khanom for treatment of

Kidney disease. 500000

2012

10410000

Financial assistance to Mr. Abul Mostakim for treatment 300000

Financial assistance to Mr. Habibir Rahman freedom Fighter

for treatment. 10000

Financial assistance to Mr. Munibur Rahman for treatment of

cancer disease 10000000

Dhaka Shishu (Children) Hospital for infrastructure

development. 100000

2013

10125000

Financial assistance to Mr. Munibur Rahman for treatment of

cancer disease 10000000

Mr. Khairul Islam Shohag for treatment. 100000

Mr. Mahbub E Alam, Sub Inspector for treatment. 25000

Social

Welfare

4064345

2010

610000

Eidgah Mosque, Dhanmondi, Dhaka 30000

Reconstruction of Chunarughat Sadar Jam-E-Mashjid,

Habigonj 100000

30

Support for cOl victim people 480000

2011

2729245

Eidgah Mosque, Dhanmondi, Dhaka 25000

Islamic Foundation towards publishing Posters and Leaflets 175000

Kububbag Pak Darbar Sharif, Dhaka 500000

Reconstruction of Chunarughat Sadar Jam-E-Mashjid,

Habigonj 300000

Standing Besides Hajj Pilgrims 1249245

Support for the victims of Pilkhan Killing 480000

2012

225000

Bangladesh Obsor Board. 100000

Galua Islamia Dakhil Madrasha 50000

Mosjid e Gausul Azam complex, Mohakhali, Dhaka 50000

Niketon welfare society, Dhaka 25000

2013

500100

Conference for school Banking 50100

Dhaka University for Religious Activities 10000

Iftar Mahfil, Banani Thana, Dhaka 50000

Janab Kari Belali, Quraner Alo Competetion 40000

Mosjid e Gausul Azam Doa Mahfil 50000

Saleha Begum, M/O Late Md. Mozammel, Ex- TJO 200000

SMESPD 100000

Sport

34220000

2010

850000

Army Golf Club 450000

Bangladesh Football Federation for BPL 400000

2011

1000000

Rewarding the Bangladesh Women Cricket Team 500000

Sponsoring Korean Cup Golf Tournament 500000

2012

17120000

Bangladesh Football Federation for Branding and Installation

of Champions League. 120000

Bangladesh Football Federation for Champions League 2011 17000000

31

2013

15250000

Army Golf Club for Premier Bank Golf Tournament 950000

Bangladesh Football Federation for Championship League 1800000

Sheikh Rasel Krira Chakra 12500000

Grand Total

213740100

Sector Wise Expenditure In Last Five Year:

From ’Figure 5.5 SECTOR WISE EXPENDITURE IN LAST FIVE YEAR ’we can interpret

that the bank spent most of its CSR expenditures on Disaster relief sector in last five years.

Expenditure on health and safety, and sports are also mentionable. But from the above table

we can see that most of the expense of education sector occurred in 2012 when the bank

establishes a school by the investment of 60 million.

Figure 5.5 SECTOR WISE EXPENDITURE IN LAST FIVE YEAR

Disaster Relief36%

Education29%

Environment,250000

health and Safety10%

Others7%

Social Welfare2%

Sport16%

SECTOR WISE EXPENDITURE IN LAST FIVE YEAR

32

5.6 Investment on Disaster and Relief Sector

Table 5.6 Investment on Disaster and Relief Sector

Row Labels Disaster Relief

2011 9100000

2012 29580000

2013 38000000

Grand Total 76680000

Figure 5.6 Investments on Disaster and Relief Sector

Although the bank spent no money on Disaster and relief sector in 2010, but from 2011 it has

increased its share. The growth decrease in the year2013 comparison to 2012

5.7 Investment on Education

Table 5.7 Investment on Education

Sum of Investment on CSR Column Labels

0

5

10

15

20

25

30

35

40

2011 2012 2013

Mill

ion

s

Disaster Relief

Disaster Relief

33

Row Labels Education

2010 285000

2012 680000

2013 61600000


Figure 5.7 Investment on Education

Education plays an important role in shaping not only individual’s career but also prosperity

of state. The education helps people to earn recognition and respect in the society.

Undoubtedly education is both socially & personally an indispensible part of human life.

However the inequalities in the standards of education are still a major issue that needs to be

solved as early as possible. The premier Bank which claims itself as one of the leading banks

shows little recognition on this sector. From Figure 5.7 Investment on Education we can see

that it spent very little amount of money on this sector .There is no mentionable expenditure

from 2010 to 2112, but in 2013 it shows a growth which is not satisfactory for a large bank

like Premier

5.8 Investment on Environment

Figure 5.8 Investment on Environment

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

2010 2012 2013

Education

Education

34

It is the world where we live, breathe, eat etc. Our entire life support system is dependent on

the well-being of all of the component of environment. The followings are the main reasons

behind protecting our earth-

To preserve our food chain

To preserve our ecosystem

Natural Beauty

The earth is our only home

As a mainstream bank.”THE PREMIER BANK LTD’ fail to make a good contribution to

protect our environment If we see ‘Figure 5.8 Investment on EnvironmentIt’ it only makes a

very little contribution in 2012 which is very unsatisfactory

Figure 3 5.8 Investment on Environment

0

50000

100000

150000

200000

250000

300000

Environment

2012

Total

Total

35

5.9 Investment on Health and Safety

Table 5.9 1 Investment on Health and Safety

Sum of Investment on CSR Column Labels

Row Labels health and Safety

2010 285000

2011 575000

2012 10410000

2013 10125000


Figure 45.9 Investment on Health and Safety

Health is a state of complete physical, mental, and social well-being and not merely the

absence of disease or infirmity. Good health increases productivity and ensures peace in

family and society. The “THE PREMIER BANK LTD’ only spent a very small share on this

sector. In 2010 and 2011 it was very insignificant amount. Although it has increased its share

in 2012 and 2013, but that was not up to mark.

0

2000000

4000000

6000000

8000000

10000000

12000000

2010 2011 2012 2013

health and Safety

health and Safety

36

5.10 Investment on Social Welfare

Figure 55.10 Investment on Social Welfare

Limited companies enjoy limited liability, so, the society bears the risk of the firms. So, in

response the firms have some responsibility to society not limited to simply supply quality

service. Like many other sectors, The “THE PREMIER BANK LTD’ did not make a

remarkable contribution in this area. It spent only a small amount of its total expenditure of

CSR

0

500000

1000000

1500000

2000000

2500000

3000000

2010 2011 2012 2013

Social Welfare

Social Welfare

37

5.11 Investment on Sport

Figure 65.11 1: Investment on Sport

Sports teach us discipline, dedication, responsibility and works as stress buster. some the

benefits are highlighted below:

Fitness

Stress Buster

Learning a Skill

Teamwork

Helps to Increase Decision-Making Ability

Improving Economy

The “THE PREMIER BANK LTD’, unlike Many sector of CSR, invested a handsome

amount on sports especially in the year, 2012 and 2013, although the investment in 2010and

2011 was insignificant. Sponsorship on BFF (Bangladesh football federation) is

praiseworthy.

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

2010 2011 2012 2013

Sport

Sport

38

5.12 Year wise CSR Analysis

CSR Expenditure in 2010 in various Sector

Table 5.12 1: CSR Expenditure in 2010 in various Sector

Column Labels

Row Labels 2010

Education 285000 health and Safety 285000

Others 6970000

Social Welfare 610000

Sport 850000

Grand Total 9000000

Figure 5.12 1: CSR Expenditure in 2010 in various Sector

In the year 2010, the ‘Sports’ and ‘others’ sectors got more attention and appeared to be the

most popular sectors for CSR activities as huge investments are made by the bank in these

segments. Besides these two important sectors large concentrations are found in the field of

Social welfare, health and safety sector.

3%

3%

77%

7%

10%

2010

Education

health and Safety

Others

Social Welfare

Sport

39

CSR Expenditure in 2011 in Various Sector

Table 5.12 2 CSR Expenditure in 2011 in Various Sector

Investment on CSR year

sectors 2011

Disaster Relief 9100000

health and Safety 575000

Others 7595755


Sport 1000000


Figure 5.12 3 : CSR Expenditure in 2011 in various Sector

In the year 2011, the ‘Disaster and Relief’ and ‘Other’ sectors got more attention and

appeared to be the most popular sectors for CSR activities for The “THE PREMIER BANK

LTD’. Besides these two important sectors large concentrations were also found in the field

of Social welfare and Sport.

43%

3%

36%

13%

5%


Disaster Relief health and Safety Others Social Welfare Sport

40


Table 2 5.12 3 :CSR Expenditure in 2012 in various Sector

Sum of Investment on CSR year

sectors 2012


Education 680000

Environment 250000



Sport 17120000


Figure 75.12 3 : CSR Expenditure in 2012 in various Secto

In the year 2011, the ‘Disaster Relief’ and ‘Sports’ sectors got more attention and priority

CSR activities for CSR Expenditure. Besides these two important sectors large concentration

is found in the field of Health and Safety.

51%

1% 1%

18% 0%

29%


Disaster Relief Education Environment health and Safety Social Welfare Sport

41


Figure 85.12 4 : CSR Expenditure in 2013 in Various Sectors

Table 5.12 4 : CSR Expenditure in 2013 in various Sector

Investment on CSR year

sectors 2013


Education 61600000



Sport 15250000


In the year 2013, the ‘Education’ and ‘Disaster relief ’ sectors were getting more attention

and appeared to be the most popular sectors for CSR activities for Premier Bank. Besides

these two important sectors large concentration is found in the field of sports.

30%49%

8%

1%

12%

2013

Disaster Relief Education health and Safety Social Welfare Sport

42

5.13 Comparative analysis of various sectors in last five years

Table 35.13 1 : Comparative analysis of various sectors in last five years

Investment on CSR

Row Labels 2010 2011 2012 2013 Grand Total

Disaster Relief

9100000 29580000 38000000 76680000

Education 285000

680000 61600000 62565000

Environment

250000

250000

health and Safety 285000 575000 10410000 10125000 21395000

Others 6970000 7595755

14565755

Social Welfare 610000 2729245 225000 500100 4064345

Sport 850000 1000000 17120000 15250000 34220000

Grand Total 9000000 21000000 58265000 125475100 213740100

Figure 5.13 1 : CSR at Various Categories in Last Four Year

CSR at Various Categories in Last Four Year

2010 2011 2012 2013

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Figure 5.13 2 CSR at Various Categories in Last Four Years in Line chart

If we observe the above figure and table we can conclude that the bank did not invest on

various sectors in an organised way and variation of investment of the same sector is

unintentional. The figure suggests that the firm did not give priority on educational sectors

through the years. Only in year 2013.it invested 6 million taka on a school. In the disaster and

relief sector firm shows a healthy growth as the figure suggests. Health and safety,

environment, Sports do not exhibit growth. at the same time ‘Figure 5.13 2 CSR at Various

Categories in Last Four Years in Line chart ’shows the similar trends

5.14 Hypothesis Test

H01: There is no significant relationship between the levels of bank (CSR) and the bank’s

(CFP).:

Regression shows that CSR expenditure explains only 15.4% of (CFP). ANOVA shows that

the calculated significant value of these two variables is greater than 0.05. Therefore, we

accept the null hypothesis that said there is no significant relationship between CSR

expenditures and (CFP).

H02: There is no significant relationship between bank size and CSR

Regression shows that Number of Emplyees explains 84% of (CFP). ANOVA shows that the

calculated significant value of these two variables is less than 0.05. Therefore, we reject the

null hypothesis that said there is no significant relationship between the levels of bank (CSR)

and the number of employees.

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

2010 2011 2012 2013

Disaster Relief Education Environment health and Safety

Others Social Welfare Sport

44

H03: The Bank does not use any structured guideline in CSR

For the lack of data we cannot test this hypothesis.

45

Chapter 6 : Conclusion and Recommendations

6.1 Conclusion

Although Premier Bank Ltd. expended a small amount of their profit as CSR activities,

expenditures of various sectors are increasing year by year. The practicing Sectors of CSR in

Premier Bank Ltd. is mainly in Disaster and Relief, health, Social Welfare. Expenditure on

Environment is a rare case.

It can be concluded from the study that all banking organization shall have appropriate policy

in place for establishing positive organizational culture and social responsible mindset of

stakeholders. If commitment for becoming a social responsible banking organization between

management and stakeholders and Accountability and creditability can be demonstrated

through effective and efficient internal audit, customers and community also be benefited

with risk reduced and quality enhanced. CSR is no longer exclusively practices in Developing

countries like Bangladesh are showing interest and commitment to CSR as well. Bangladesh

consist many social problems. Government alone cannot solve this problem. As a business

partners it is need to everyone specially commercial banks take part to reform the society.

Because CSR is the more common place among banks, there are concerns the some banks

promote an image of CSR whether or not they have true strategy in place and the results to

show. Banks like Premier Bank Should come forward to contribute to the Society.

6.2 Recommendations:

Premier Bank Ltd considers only a few areas where it concentrated its CSR expenditures. The

bank should diversify their CSR practices and considered the other important areas of the

society, such as

Women empowerment,

Sanitation in rural areas,

Rural development activities related to the poverty alleviation.

This can ensure the overall development of the country. For this reason, the central bank,

Bangladesh Bank monitoring the CSR adoption and performance of banks and also give

some directions to the banks and provide some priority areas for CSR practice. It would be

helpful if the government created a CSR policy providing guidance on CSR activities.

Awareness building Programme would be useful. If there was a greater awareness amongst

banks about corporate social responsibility and the kinds of CSR activities they could

46

undertake. Those undertaking CSR must ensure that they are complying with the law in

relation to labour rights and any legal obligations they may have in protecting the local

community and environment. Institutions must introduce CSR as a course for it to be treated

as pure academic

Discipline, so as to train experts in that area, because when that is done the deprived

Communities in the country will one way or the other is developed. Institutions must also

collaborate with the multinational companies by sending students on attachment to the

multinational companies when it comes to CSR activities because the indigenous companies

do not have structured CSR policies.

6.3 Reflection of the Researcher

While reflecting on the experience of writing a thesis, I came to the realization that I truly enjoyed this

process, at least most of it. I am the type of person who loves to learn and always seeks to obtain more

knowledge in and out of the classroom. I am especially passionate about learning things related to

corporate world and also about real-life practice. Though I originally had no idea as to what CSR

practice inside a Commercial Bank is, after spending a several days of Interview , researching and

writing about them I can now say I know more than I ever could have hoped about CSR in

Commercial Banks.

Though it was difficult at times to motivate myself to do the work, on the whole I enjoyed the

research and writing and found that the work was much more manageable than I thought it would be. I

viewed this work in five parts of which the first was planning. This data-collection and interviewing

part was one of the most difficult as I tried to match my ideas for what I had to collect and what the

interviewee is going to answer directly or indirectly. I enjoyed doing my own research and conducting

interviews since I feel like with this research I was able to make a contribution to the field and

produce something new. My favourite part was actually interviewing the officers of EXIM Bank

Foundation and acquires many rare or undisclosed information by officials, intentionally or

unintentionally.

I can now look back and realize that this experience has helped me both as a student and as a real-life

working person. Research and writing skills are not only valued in an academic setting, but also in the

real-life as well, though the result is very indirect. Additionally, working under Mithun Kumar

Acharjee has given me the opportunity to develop a standardized and formal method to analyze and

ordering of Data and finally interpret and present them.. Overall, I feel that this has been both a

valuable and enjoyable experience and I now feel prepared and excited to see the implementation of

my study in other research or in real business-life.

48

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Appendices

Data Collection Instrument Questionnaire - Part A : Expert opinion Survey

Part B: Semi-Structured Interview ( with Likertscale and Ranked Data)

Part C: Survey on Compliance Measurement

Yearly Annual Report by Exim Bank Foundation.

Recommended use of Annual Financial Report and website discloser by officials.

Collection of Books about CSR from Internet, previous Thesis, Dissertations and documents

available or served by company.

Interview Transcripts: A copy of questionnaire was served, while no transcription, conversion or statistical measurement was

made.

Statistical Output

After Tax Income CSR Expenditure

1772.02 9000000

510.9 21000000

603.41 58265000

785.75 125475100

SUMMARY OUTPUT on the relationship between CSR expenditure and CFP

Regression Statistics

Multiple R 0.392037874 R Square 0.153693695 Adjusted R

Square -0.269459458

Standard Error 59.04755827

Observations 4

ANOVA

df SS MS F Significance F

Regression 1 1266.375 1266.375 0.363211 0.607962126 Residual 2 6973.228 3486.614

Total 3 8239.603

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Coefficients

Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0% Upper 95.0%

Intercept 85.91699249 61.4534 1.398084 0.29696 -178.4956366 350.3296 -178.496 350.3296216

After Tax Income

-0.035382636 0.05871 -0.60267 0.607962 -0.28799072 0.217225

-0.28799 0.217225448

CSR Expenditure Firm size

9 965

21 1117

58.265 1259

125.4751 1283

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.83990781 R Square 0.705445129 Adjusted R

Square 0.558167694 Standard Error 97.64599927 Observations 4

ANOVA

df SS MS F Significance F

Regression 1 45670.518 45670.518 4.78991 0.160092 Residual 2 19069.482 9534.7412

Total 3 64740

Coefficients Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept 1030.197048 75.4175 13.6599 0.0053 705.7018 1354.6923 705.7018 1354.6923

CSR Expenditure 2.354316325 1.076 2.189 0.160 -2.274 6.983 -2.274 6.983

Corporate Social Responsibility in the Banks of Bangladesh in Context of Premier Bank, Bangladesh

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