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THE EFFECTS OF CORPORATE SOCIAL RESPONSIBILITY ON THE PERFORMANCE OF OIL MULTINATIONAL CORPORATION

Business Administration & Management Project Topics

 CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

There has been a source of controversy about Multinational Corporation over the years. Tatum (2010) holds that a typical multinational corporation (MNC) normally functions with a headquarters that is based in one country, while other facilities are based in other countries. In some perspective a multinational corporation is referred to as a multinational enterprise (MNE) or a transnational corporation. In the view of Obumneke (2013), multinational corporations enter host countries in different ways and different strategies. For this reason, some enter by exporting their products to test the market and to find whether their existing products can gain sizeable market share. For such firm they rely on export agents. These foreign assembly operations are established to save transport cost because there is a limit to what foreign exports can achieve for a firm owing mainly to tariff barriers and quotas, and also owing to logistics or cost of transportation. Most of the firms are encouraged by the low wage rates and other environmental factors.

To meet the growing demands in the foreign countries, the firm considers other options such as licensing or foreign direct investment which are critical steps. Every step takes strategic planning and is motivated by profit through sales growth.

Obumneke (2013) goes further to assert that the idea of Multinational Corporation has been around for centuries but the second half of the twentieth century multinational corporations have become very important enterprises in different structural models. The first and common model is for the multinational corporation positioning its executive headquarters in one nation, while production facilities are located in one or more other countries. Ozoigbo and Chukuezi (2011) also accept that this model often allows the country to take advantage of benefits of incorporation in a given locality, while also being able to produce goods and services in areas where the cost of production is lower.

The second structural model is for a MNC to base the parent company in one nation and operate subsidiaries in other countries around the world. With this model, just about all the functions of the parent are based in the country of origin. The subsidiaries more or less function independently outside of a few basic ties to the parent. A third approach to the step of a MNC involves the establishment of a headquarters in one country that oversees a diverse conglomeration that stretches to many different countries and industries (Robinson, 1979). In view of the above, Gilpin (1978) concludes that the multinational corporation include affiliates, subsidiaries and possibly even some facilities that report directly to the headquarters. Such direct investment means the extension of the managerial control across national boundaries.

Rugman (1985) who prefer to use the name multinational enterprises, say that the concept of the MNE is that “the difference between Domestic Corporation and the MNE is that the latter operates across national boundaries”. While institutions are important for economic development, particularly in resource rich countries, the interaction between multinational corporations and host country institutions is not well understood (Wiig and Kolstad, 2010). There is a risk that multinational corporation facilities patronage problems in resource rich countries, exacerbating the resource curse.

Gilpin (1987); Stapford (1988) observe that the Marxists view the emergence of the multinational corporations (MNCs) as a historically progressive aspect of capitalism in the process of developing, at international level. In all these, the common basic productive activity is more than one social formation. However, it is worthy of note that in a social formation there may be many multinationals with different nationalities and also many corporations of the same nationality.

Meanwhile, for multinational corporations to thrive well in their business there should be certain responsibilities they must carry out. Being honest to these responsibilities and commitment to their social responsibilities, will create much environmental harmony for business growth. It is true that people engage in business to earn profit. However, profit making is not the sole function of business. It performs a number of social functions, as it is a part of the society. It takes care of those who are instrumental in securing it existence and survival like the owners, investors, employees, customers and government in particular and the society and community in general. So, every business must contribute in some way or the other for their benefit. For examples, every business man must ensure a satisfactory rate of return to investors, provide good salary, security and proper working conditions for its employees, make available quality products at reasonable price to its consumers, maintain the environment properly etc. These functions are what is referred to as corporate social responsibilities (CSR).

Multinational Corporations (MNCs) can therefore have a positive impact in their host communities or counties, especially through corporate social responsibility initiative focusing on sustainable development and co-operation with civil society.

 

1.2       STATEMENT OF THE PROBLEM

Presently, it is obvious that most corporate citizens or groups organization are not living up to expectation of their duties in the host communities.

 

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