"The purpose of business is business”. Is Corporate Social Responsibility (CSR) a contradiction of this view?: A Critical Examination of the Motives that drive CSR engagement by Companies listed on the Zimbabwe Stock Exchange (ZSE) and the impact of CSR on financial performance

Abstract

Business is expected to give back to the society through corporate social responsibility (CSR). In Zimbabwe, public limited companies engage in CSR but there is a rising pressure from Government and society on companies to increase their CSR engagement. Managers have the dilemma of trying to satisfy the expectations of multiple stakeholders on one hand and satisfying shareholders by increasing firm value on the other hand. These managers have the complex task of crafting CSR policies that balance compliance to mandatory CSR and choice of voluntary CSR activities that are in line with the company’s strategic thrust so that the firm’s financial performance is not traded off. The main purpose of this study was to examine the motives of CSR engagement by companies listed on the ZSE and to examine the impact of CSR investment on financial performance. The research used quantitative methods to collect and analyse data. Of the 63 companies listed on the ZSE, 52 companies were selected using stratified sampling by sector and four managers were randomly selected from each company to respond to the structured questionnaires. The research found a significant positive relationship between motives and CSR engagement although motives affect CSR activities differently. The research also found that the ethical and philanthropic CSR activities have a significant positive impact on financial performance. A CSR conceptual framework was proposed showing main drivers of each of the CSR elements as well as the CSR elements that have a significant positive impact on financial performance. These results suggest that companies that intend to derive financial benefits from CSR investment should concentrate more on the philanthropic and ethical CSR activities. On the other hand, being conservative by just focusing on maximising economic value, compliance to legal and environmental regulation may not result in increased financial performance if the firm does not do more to the society. It is recommended that managers carefully select CSR activities focusing more on ethical and philanthropic activities so that there is no trade- off between CSR and financial performance. It is also recommended that the Government hold CSR awards, offer more tax incentives and have a more voluntary CSR policy to motivate companies to invest more in CSR.