A research study on the correlation between a company’s corporate social and financial performance: The Case of 1000 Top Earning Companies in the Philippines.
In Partial Requirement
Alvarez, Mark Gerald
Miranda, Kim Gerald
1.1 Research Problem
How would the four components of corporate social responsibility- customer, employee, environment and social- affect the financial performance of the 1000 top earning companies in the Philippines? Which among the four component of corporate social responsibility is most effective in improving a company’s financial performance? What factors influence the relationship between corporate social responsibility and financial performance?
1.2 Background of the Study
Gone are the days where powerhouse companies focus all of their resources in developing a strategy to increase their profitability. In the past, companies are satisfied as long as their financial performance is strong. However, today, with numerous factors coming into place, firms cannot afford to focus on just the financial aspect of their operations. A strong financial performance is not enough for the company to achieve a long-term sustainable growth. Profitability may be enough in the short run, but not in the long-run. For this very reason, firms engage in different activities that not only maximize their welfare, but also the welfare of the people who are related to them. These stakeholders form a big part of the company’s sustainable growth, which makes it appealing for the companies to be active in corporate social responsibilities (CSR). CSR became widespread due to a lot of factors and some of them are pressures from non-governmental organizations (NGOs), activists and multinational companies who spreads their CSR beliefs and practices (Beckman et al, 2009). These pressures forced firms to be active in CSR, which is actually beneficial not only to the company but also to its stakeholders. Doing a CSR has many identifiable benefits from human capital, corporate identity, and products. However, the extent and nature of the benefits will vary depending upon the nature or industry of its enterprise (http://www.unescap.org/tid/publication/indpub2565_chap1.pdf, n.d.). There a lot of business advantages why companies perform a CSR. According to Epstein-Reeves (2012), there are six reasons why companies should give importance to CSR. First, the company would gain Brand and Reputation advantage over its competitors. Nowadays, many companies are thriving for a unique selling proposition in order to gain a competitive advantage over its competitors so that customers would remember them. That is why, Brand or Reputation equity is important to business because it is founded by different core values such as “trust, credibility, reliability, quality, and consistency that customers perceive the company and its products to have” (http://www.unescap.org/tid/publication/indpub2565_chap1.pdf, n.d.). CSR plays a significant role on this advantage since it is based on distinctive ethical values, which would help them differentiate themselves from its competitors. Second, the company would have a better Human Resource advantage over its competitors. They say that having a competent human resource would lead to a sustained corporate success; which is true, because there is a emergent evidence that they practice CSR in recruiting employees. CSR has been a critical part when employing quality employees in a competitive market since many employees considers CSR as one of the criterion in applying a job. Therefore, “good CSR practices tend to increase a company’s ability to attract quality workers” (http://www.unescap.org/tid/publication/indpub2565_chap1.pdf, n.d.). Third, it will have a Cost Advantage on its business operations and human resources management. Most of these cost related advantages are from environmental management...
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