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STAKEHOLDER INFLUENCE IN CSR STRATEGIC DECISION PROCESS:
THE CASE OF THE PORTUGUESE BANKING
EUPRERA 2014 CONGRESS
“COMMUNICATION ETHICS IN A CONNECTED WORLD”
LASCO Laboratory, Université Catholique de Louvain – IHECS Institute
Brussels, September 11-13
Abstract
Considering banking as one of the largest private sector in Europe with the most-unionized,
institutional arrangements are relatively robust. Notwithstanding, alongside the current crisis
conditions lies a profound legitimation crisis for banking sector (Arrowsmith et al., 2010;
Holton, 2012). A key question is how CSR might enhance organisational legitimacy. Despite
the acceptance of CSR by this sector, there remains a sceptical view of CSR due to gap between
the interests of banks and its stakeholders. Based upon the literature review about CSR, this
paper seeks to address the following research questions (RQ): RQ1: Does CSR influence
customer trust in the Portuguese banking sector? and RQ2: To what extent the interests of
stakeholders have been taken into account in strategic decision processes? For the first RQ, a
questionnaire aimed for bank clients was prepared covering the respondent’s perception about
CSR performance. For the second RQ, semi-structured interviews were applied to CSR
professionals working at a national bank, a foreign bank based in Portugal, a saving bank and an
agricultural bank. RQ1 results reveal a positive correlation between CSR activities and banks
financial performance, however not reflected on costumer’s confidence, weakening legitimacy
of these structures. Concerning RQ2, this study identifies different strategic options regarding
the Portuguese reality. Commercial banks reflect CSR practices driven by shareholders,
prioritizing activities within financial performance. Saving bank presents a similar strategy, with
a strong reputation impact based on activities carried out through their private Foundation.
Agricultural bank have come in to existence based long-term cooperative and rural principles
that is reflected on their business operations.
Keywords: Corporate social responsibility (CSR), legitimacy, stakeholders, banking,
Portugal
2
INTRODUCTION
The current crisis we are living jeopardize the financial sector, namely the economies that are
considered peripheral, as is the case of Portugal, thus originating a negative impact whose
consequences also have repercussions in terms of consumer confidence, reputation and people’s
trust1 in institutions.
In the financial market, a growing number of banks are seeking to improve the impact of their
activity on society, adopting CSR as one of the most expressive forms of sustainable and
responsible investment. Their activity has influenced economy and markets as well several
aspects of social landscape with most of their behaviour pattern generalized. Hence, the
question arises whether or not they are desired and appropriate.
Concerning to the strategic nature of CSR, literature suggests stakeholders theory as one of the
main approaches, underlining management strategic using that perspective. During the past
decades, a very few themes have generated so many published works in management science
and business practice as stakeholder’s theory (e.g. Goodpaster, 1991; Evan & Freeman, 1993;
Donaldson & Preston, 1995; Berman et al., 1999; Gibson, 2000; Friedman & Miles, 2000;
Fassin, 2010). We also believe that is consensual in business practice a position against
Friedman (1970) that has argued that a corporation’s purpose is to maximize the return on
investments to shareholders. However, stakeholder theory “does not provide any orientation as
regards how to benefit all parties equally and justly” (Mainardes et al., 2011). In different
perspectives, “there is a conceptual agreement that managers should proactively address
stakeholder interests, yet little has been done to identify which stakeholder interests should be
attended to and what managers should do to address them” (Berman et al., 1999). The existing
research provides, comparatively to the theoretical framework, little knowledge about how
companies manage the relationship with the stakeholder’s. That is what is behind the decision
management process? Are the individuals or groups opinion reflected in genuine, perceptible
changes in the daily practice? Further research of an empirical nature is required that combines
it with legitimacy in order to ensure organisational socially constructed commitment.
Legitimacy “is a generalized perception or assumption that the actions of an entity are desirable,
proper, or appropriate within some socially constructed system of norms, values, beliefs, and
definitions” (Suchman, 1995: 574). Best known theoretical framework belongs to Suchman
(1995) which is adopted in this research. Institutional approach is concerned with social
stability, drawing attention to reproductive processes that function as stable patterns for
sequences of activities that were routinely enacted (Jepperson, 1991; Powell, 2007). Such
1 In this article, trust refers to how people understand organisations in terms of trustworthy ... captured by the term legitimacy
involves the existence of a credible collective account or rationale explaining what the organization is doing and why
(Suchman, 1995: 575).
3
patterns tend to be emphasizing on an entire sector of organisational life as health care or
banking (DiMaggio & Powell, 1983; Schuman, 1995). A cross approach is adopted, using
insights from legitimacy strategic view arguments that support the homogenizing character of
legitimacy in sense that modern corporations, such as banks, embraced CSR as a collective
policy. On the other hand, institutional approach and its association with legitimacy in detail
require strategy since it has focused primarily on organisations strategic responses to
institutional pressures (Oliver, 1991), also enabling better optimization of stakeholder theory.
CSR encompasses a variety of issues revolving companies’ interaction with society which
includes the pressure created by the regulatory bodies, NGOs, customers, suppliers, employees,
public authorities society, etc. Organisations are often confronted with concealing institutional
concerns (how to make societal beliefs embedded) and internal specific objectives (e.g.
shareholder’s interests). This aspect was emphasizing since the 1990s, when another type of
social evaluation gained prominence in organisation studies, namely reputation2. This is often a
strategic resource that banks exploit for competitive advantage linked to CSR. In our point of
view, the problem is that organisations use reputation as a long term goal rather than a tactical
response to achieve better institutional procedures. While reputation get reduced, in practice, to
a small number of socially constructed ranking criteria and highlights comparisons among
organisations, legitimacy emphasizes the social acceptance resulting from adherence to social
norms (Deephouse & Carter, 2005). This lead us to a reflection about what could be the
common aspect within both legitimacy and reputation since it was obvious that reputation
metrics are and will continue to be used to predict future medium-term behaviour. Both
concepts can be measured through stakeholder’s perception and are link to trust as a central
component (Deephouse & Suchman, 2008).
So far, researchers has exhausted examined the “what” and the “why” questions (Tang et al.,
2012). There are few studies approaching the role of CSR strategy in the field of banking
activity. Taken collectively, this research offers contributions for academy and practice. After
building the argument for stakeholder approach, questions emerge from the linkage between
CSR and legitimacy, adopting a CSR broader perspective, rather than distinct management
discipline. Regarding practical considerations, little research to date has involved the saving and
cooperative banks in the area of CSR. This paper shows the differences between the strategies
adopted by the four types of banks that operate in Portugal as well as their own client’s
perception about CSR.
2 According to Deephouse & Suchman (2008) adopted definition, reputation is a generalized expectation about a firm’s future
behavior or performance based on collective perceptions (either direct or, more often, vicarious) of past behavior or
performance.
4
This paper is structured as fallow: first a brief overview of CRS within stakeholder approach is
presented followed by its essential aspects for meet organisational legitimacy. Section 2
describes the case study, methodology and findings. Finally, the article presents the conclusions.
1. BACKGROUND
1.1. TAKING STAKEHOLDER’S KNOWLEDGE TO CSR
Freeman (1984: 46) defined the term stakeholder as “any group or individual who can affect or
is affected by the achievement of the organisation’s objectives”. The theory proposes that
corporation leaders focus their efforts on encompassing all of the organisational stakeholders,
beyond the primary ones, recognizing their contribution to the organisation. The idea is shaped
in CSR as it “addresses a company relationship with its stakeholders” (Werther Jr. & Chandler,
2010: 7).
Concerning financial institutions, overall there is a little evidence of critical and hermeneutic
interest3. The evidence is stronger on technical interest that enables to forecast and control
(Jensen, 2013), which has stimulated a critical debate. We propose that the organisations
capacity to meet legitimacy could be facilitated through the stakeholder theory. One of the main
questions raising discussion is how can legitimacy be addressed in a normative way? Bowie
(2012: 182) states that “CSR takes seriously the normative component of stakeholder theory.
However, the way CSR is articulated, it often seems like add-on, something you do after a firm
makes a profit”.
Authors have mixed feelings about CRS impact on organisational legitimacy since the theory
offers different dimension that can be addressed. Carroll (1991: 43) expresses this argument
saying that “there is a natural fit between the idea of CSR and an organisation’s stakeholders.
The word “social” in CSR has always been vague and lacking in specific direction as to whom
the corporation is responsible. The concept of stakeholder personalizes social or societal
responsibilities by delineating the specific groups or persons business should consider in its
CSR orientation”. CSR literature depicts the constraints on the stakeholder classification that
often reflect criteria representing stakeholder’s capacity to influence the organisation direction,
behaviour, process or outcome. Clarkson’s typology (1995) primary and secondary is the
most widely accepted classification of stakeholder on CSR literature, but “the myth of primacy
of the shareholder tells us that some stakeholders are more important than others” (Freeman &
Liedtka, 1997: 287). Mitchell et al. (1997) introduced a pragmatic approach emphasizing
legitimacy as the attribute that stresses strategic behaviour of an organisation in accordance with
the socially constructed context. Most discussion on this topic addresses legitimacy as a
stakeholder condition, assuming that companies can affect or be affected by anyone, which is
3 Jensen, Inger (2013), Various interests in knowledge creation Inspired by Jürgen Habermas, Erkenntnis und Interesse, Euprera
PhD Seminar, Barcelona
5
different than search for legitimacy as a necessary condition to understand corporations and
communities’ context and therefore social commitment.
The aspects that centralize this critical debate are controversial given “the original doctrine of
CSR was not intended to be strategy to be used as a competitive advantage for individual firms”
(Acquier et al., 2010). Goodpaster (1991: 62) states that “the strategic approach pays attention
to stakeholders as to factors that might affect economic interests, so many market forces to
which companies must pay attention for competitive reasons”; Fassin (2010: 40) notes that
“gradually, the classical “claimant” definition has been enlarged to the “influencer” definition”;
another problem is that both, some academics and practitioners, ignores the presupposition that
business is a social institution (Murphy & Schlegelmilch, 2013).
Firstly, we consider that reduce stakeholder theory influence in CSR approach to stakeholder
ambiguity is reductive. Despite the constraints reflected on these instrumental concerns, the
central core of the theory is normative (Donaldson & Preston, 1995; Evan & Freeman, 1993;
Berman et al., 1999; Wicks et al., 1999; Bowie, 2012). On the other hand, there is a positive
correlation between corporate financial performance and CSR (Margolis & Walsh, 2003; Tang
et al., 2012) that places the attention and impact of the instrumental concerns on the public
sphere which is an opportunity to confront CSR issue in banking activity as the metric to
establish clear responsibility on organisational legitimacy. Furthermore, people generally argue
that if it is true that banks need broad legitimacy in society to sustain their long-term ability to
create stakeholders value, is equally true that society depends upon big business to provide
critical economic and other benefits. Stakeholder’s approach is considered as “a necessary
process in the operationalisation of CSR, as a complementary rather than conflicting body of
literature” (Matten et al., 2003: 111). Finally, there has been no empirical work that
acknowledges the importance of context for judging asymmetrical relationships between the
organisation and its stakeholders. On the first point, an important matter is to understand the real
motivation of these institutions in adopting CSR so we can realize their role in society
(engagement) and the real dimension of attention placed on stakeholders (legitimacy), thus
advancing CSR state of art in the current Portuguese banking activity.
1.2 CSR – A KEY DRIVER TO ORGANISATIONAL LEGITIMACY
With respect to bank’s context, the current conditions of austerity heightened concern with
aspects related to the interests of stakeholders and with a more encompassing perspective that
considers the well-being of society in general (Santos, 2006). In the last decades, the debate
over the proper relationship between business and society has focused on the topic of CSR
(Klonoski, 1991; Schwartz & Carroll, 2003). We have decided not to bring any CSR definition.
The prevailing issues surrounding the need for increased public trust in organisations requires a
6
holistic understanding of the CSR field in order to meet legitimacy. While views about CSR
continue to diverge between two broad approaches, narrow/instrumental and critical view,
perhaps the most important to take into account are the changes within society. Carroll’s (1999)
noted that the concept of CRS today is the same as in the past; what have changed are the
problems that organisations face, mainly because society and organisations have changed and so
have their relationships.
Central to institutional approach is that focus is placed in a “set of constitutive beliefs” (Meyer
& Scott, 1983; DiMaggio & Powell, 1991; Schuman, 1995). Organisational context involves its
“operating environment” that includes taken for granted institutions that define what constitutes
legitimate behaviour. Practices and structures derive from social rules, norms and values
adopted by their peers pressures organisations to a similar behaviour (DiMaggio & Powell,
1983; Schuman, 1995) in an effort to gain social legitimacy “instead of the demands of their
work activities” (Meyer & Rowan, 1977: 341).
To improve our understanding it is important to understand how legitimation process is
perceived within society. The gap between corporate practices and stakeholders perception of
CSR leads to different reactions. While primary stakeholders probably call for strategies that
enhance competiveness, suffering from popular legitimacy, perception from secondary
stakeholders are very linked with their own values and norms, but also influenced by the nature
of the relationship. It becomes less clear when comes to analyse key groups such as NGO’s or
environmentalists. A crucial aspect on legitimation process is that legitimacy is mediated by
individual’s behaviours and perceptions as a collective process. Thus, the multidimensional
character of legitimacy is one of its main properties that contribute for this spectrum of reactions
regardless the same strategic option, once “how it works may depend on the nature of the
problems for which it is the purported solution” (Schuman, 1995: 573). Organisational
legitimacy explains how corporations meet or lose societal approval to operate. According to
Dowling & Pfeffer (1975: 127) an organisation can do three things to become legitimate:
First, the organisation can adapt its output, goals, and methods of operation to
conform to prevailing definitions of legitimacy. Second, the organization can
attempt, through communication, to alter the definition of social legitimacy so that it
conforms to the organisation’s present practices, output, and values. Finally, the
organisation can attempt, again through communication, to become identified with
symbols, values, or institutions which have a strong base of social legitimacy.
Legitimacy as a motivation that lead organisations to engage CRS depends, on the first point, of
an appropriate examination of the context that involves organisations in order to assess the logic
behind the practices, since its purpose is to become congruent to prevailing values and
social norms. Since it is a difficult process, organisations attempt to become legitimate thought
communication. Although, even through communication, the changing of social norms is a
difficult process (Dowling & Pfeffer, 1975: 127), since it is based on the audience self-interest
7
involving direct exchange and influence aspects between the organisation and its publics. When
organisations engage CSR in order to adopt constituents’ standards of performance as its own,
adopting a socially constructed perspective, they are using influence4 legitimacy type, becoming
therefore more distant to cognitive legitimacy that often lies behind what is tangible; in contrast
rest upon an unspoken orientation (Suchman, 1995).
Stakeholder’s perception of social performance is increasingly perceived as one of the most
vital assets of the corporation to gain legitimacy (Cornellisen, 2004: 59) which led us to provide
a reasonable expectation that CSR can play a positive contribution in strengthening confidence
in banking sector, therefore, bringing these institutions more close to cultural accounts inherent
to legitimacy in its “pure” sense.
In the previous section, the case study presented aims to verify congruence alignment between
stakeholder’s perceptions of CSR and banks own perspective.
2. CASE STUDY
2.1 PORTUGUESE FRAMEWORK
According to Banco de Portugal (BDP), there are 33 banks in Portugal, 4 saving banks and 89
central and mutual agricultural banks. The five major groups5 control more than 80% of the
market. Following the Santander Totta acquisitions, the market share of foreigner banks has
increased to over 20%. The activity of Portuguese banks is primarily focused on customers
lending and represents approximately 6% in terms of GVA6. In 2014, Portuguese banking
system was still deep in the European financial crisis. Scandals have first pushed their
reputation down followed by a legitimation crisis. There are several narratives and
interpretations about the significant challenges that lie ahead given the longstanding nature of
many of the causes of the crisis. Yet, the banking current crisis situation is undoubtedly the
legacy of policy and institutional weaknesses in a changing global environment in which banks
appear as prime actors. Studies conducted by the associations that promote CSR, academic
research and several debates around the theme, emphasis on the CSR results taken by
Portuguese banks as an opportunity to improve its reputation deflected from legitimacy purpose.
Behind this legitimating crisis in banking system there are several issues that caused
stakeholders to question the underlying culture and values of the banks, beyond the “Portuguese
banks’ balance sheets” that are address to the hypothesis indicated in the next section.
4 See Schuman (1995), types of legitimacy
5 Caixa Geral de Depósitos, Banco Comercial Português, Banco Espírito Santo, Banco BPI and Santander Totta
6 Gross value added (GVA) is defined as the value of all newly generated goods and services less the value of all goods and
services consumed as intermediate consumption, (http://epp.eurostat.ec.europa.eu/, June, 2014)
8
2.2 HYPOTHESIS AND METHODS
For RQ1 Does CSR influence customer trust in the Portuguese banking sector? a
questionnaire to measure the level of confidence of customers was developed in order to assess
their relationship with the bank, as an important loyalty driver, their perception of CSR
practices, including the bank’s commitment to sustainable development and the bank’s image.
They also include two question formulated to reflect their perception about the banking
sector.These also cover the client’s personal profiles. The questionnaires for the clients were
available in each bank, during a period of one week in May 2014 and were accessed on
a voluntary basis. The total number of clients inquired is 99; the number of respondents in each
bank ranging from 17 up to 36. The data was analysed by using SPSS program and several
hypotheses were tested using ANOVAs analysis, a parametric test used to compare more than
means in order to study if the difference is significant or not. For the interpretation, we compare
Sig (degree of significance) with (error ratio = 5% i.e. 0.05). If Sig > we consider the difference
insignificance and vice-versa. Descriptive approach was also used in order to evaluate client’s
perceptions of the analyzed banks.
For the second group of respondents applied to CSR professionals in banking a semi-
structured interview was developed in order to assess RQ2 that aims to know in what extent the
interests of stakeholders have been taken into account in strategic decision processes. These also
include questions about the respondent’s personal profiles.
Both, the questionnaire and the interview questions were inspired by the international
recommended standards for support CSR best practice on banking sector (PRI7, 2012; SRI8,
2012 and EPs9, 2013) taking into account previous research on CSR in Portugal and largely the
context that evolves banking activity within stakeholders’ interests.
The sample consists in four banks covering the three types of financial agents as well as their
clients. In defining the sample10 of participating banks we consider important to address the
7 PRI - Principles for Responsible Investment Initiative is an international network of investors working together to put the six
Principles for Responsible Investment into practice supported by United Nations, (http://www.unpri.org/about-pri/about-pri/,
March, 2014).
8 Eurosif - European Social Investment Forum’s Mission is to Develop Sustainability through European Financial Markets.
According to Eurosif Sustainable and Responsible Investment (SRI) combines investors’ financial objectives with their
concerns about social, environmental, ethical and corporate governance issues, (https://yoursri.com/responsible-
investing/definitions, March, 2014).
9 The Equator Principles (EPs) is a risk management framework, adopted by financial institutions, for determining, assessing and
managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence
to support responsible risk decision-making (http://www.equator-principles.com/index.php/about-ep, March, 2014).
10 This study aims analyze three types of financial agents: banks, saving banks and agricultural banks. According to the
Portuguese framework in banking system, banks activity is focuses on financial transactions and financial services, in which the
most common are lending and receiving deposits from the general public and grant credit and other finance on their own
account.
The saving banks are associated credit institutions or belonging to a mutual association with social nature. Those banks
provides a range of general banking services to its customers, from individuals to corporations and are dedicated to promote
savings and to provide credit to private segments, micro, small and medium enterprises and institutions of social economy. The
9
specific characteristics of the banking system in Portugal. Thus, the four organisations analysed
in terms of banking activity are two commercial banks – national and foreigner, a saving bank
and an agricultural bank. We adopted the following designations to name each group of banks
represent: STB for state bank; FPB for foreigner private bank; PMA for private mutual
association and CAB for cooperative agricultural bank. In 2012, the state-owned bank had a
market share around 30% with 5 million customers and has reported 814 branches. It is present,
either through branches, representative officers or direct equity interests in local financial
institutions, in 23 country worldwide, embracing four continents. FPB is the leading retail bank
with a market share around 11%. In 2012 has reported 667 branches with 2.2 million customers.
PMA is a private mutual association (non-profit organisation), constituted in 1840, the oldest
financial institution in Portugal and far the largest one holding 458 branches with approximately
6% market share, in 2012, and 1.4 million customers. CAB (cooperative structure) is visible in
291 out of 308 municipalities (94%) through a network of nearly 700 branches. The current
market share accounts are 6.4% holding approximately 1.2 million customers.
2.3 FINDINGS FROM THE QUESTIONNAIRES
2.3.1 PROFILE OF BANK’S CUSTOMER
Costumers from STB, FPB and PMA are mainly female aged between 35-54 with a higher level
of education. For the PMA 45% of the respondents have secondary education. For these banks
more than 80% of the respondents work with their institution for more than 5 years. Costumers
from CAB are mainly male aged between 35-54. 35% of the total has more than 55 years and
18% have primary education. Approximately 60% work with their bank for more than 5 years.
Concerning the classification by type of account findings show that 92% of the total clients
inquired have personal accounts in the banks they are dealing with.
Table 1 – Customer’s profile
members of this entity also share in any losses or profits that result from the fund. Mutual agricultural credit banks aims mostly
at promoting the investment in the agriculture sector. It can only exist one branch per district.
,0%
20,0%
40,0%
60,0%
80,0%
FPB STB PMA CAB
[18-34]
[35-54]
[≥ 55[
0,0%
,0%
20,0%
40,0%
60,0%
80,0%
FPB STB PMA CAB
Female
Male
0,0%
Gender
Age
10
Table 2 –Level of education
2.3.2 RELATIONSHIP BETWEEN THE CLIENT AND HIS BANK
Interpersonal communication is often used to maintain the right balance in problem solving (e.g.
clarification of client’s doubts, investment advice, deposit security and services available)
between organisation and its clients, concerning banking traditional financial service
performance. The majority of respondents showed positive perception towards the service
performance. Although, PMA and CAB have a reinforced believe on this relationship revealing
no negative perceptions.
Table 3 – Interpersonal communication
Sig = 0.309
In what concerns friendliness towards customers based on a trust relationship between the
account manager and the client that allows sharing of their private life (e.g. family affairs,
happiness, consumption habits, personal feelings, background and job related problem or
situation) different behaviours was observed concerning the institution ability to find the
solutions to problems related to the individuals accounts and the share of personnel issues. Most
of FTP client’s revealed high level of “reservation” concerning both items. The majority of the
respondents for STB showed lack of confidence on their managers to share intimacy issues.
0,0%
20,0%
40,0%
60,0%
80,0%
FPB STB PMA CAB
< Year 1 Primary Education
Year 5-6 Year 7-9
Secondary Education Higher education
CAB
PMA
STB
FPB
level of interest
totally agree
agree
agree with
reservations
disagree
totally disagree
11
CAB is the bank that helps most their costumers solving their accounts problems. A better
correlation was found in PMA between the two items.
Table 4 – Client’s perception about the confidence they have in their account managers
2.3.3 KNOWLEDGE ABOUT THE BANK’S COMMITMENT TO SUSTAINABLE
DEVELOPMENT
About the banks contribution to the local community development in terms of existing resources
CAB and PMA have the most favourable opinion against STB and FPB, both with the majority
stating “agreement with reservations” in this matter.
TD
D
AWR
A
TA
0%
10%
20%
30%
40%
50%
60%
0%
10%
20%
30%
40%
50%
60%
TD
D
AWR
A
TA
FPB
STB
CAB
PMA
a base trust relationship that enables client’s to share their personal lives (Sig = 0.374 )
a base trust relationship that has contribute to solve a problem (Sig = 0.132)
TD: totally disagree; D: disagree; AWR: agree with reservations; A: agree; TA: totally agree
Legend
12
Table 5 – Customer’s perception about the banks contribution to the local community
Sig = 0.025
The entrepreneurship initiatives within the SD are an important asset that banks should
empower. Again, this is more consistent for CAB and PMA than to STB and FPB respondents.
Table 6 – Customer’s perception about entrepreneurship initiatives
Sig = 0.015
All the respondents have agreed that honesty, mutual respect, trust, integrity, transparency and
fairtrade are sustained through ethic values and are, somehow, present in their bank business
operations. (STB: 40%; FPB: 35; PMA: 59% and CAB: 47% agree). CAB has the most
favourable opinion with 41% of individuals agreeing totally. STB sum 32% of negative
perceptions.
2.3.4 BANK’S IMAGE
The role of communication stresses the alignment between the methods and tools used by bank
to disseminate messages about its products, services and corporate image to its customers. The
results revealed that CAB, STB and FPB have the most reliable perceptions. PMA client’s
FPB
STB
CAB
PMA
8,3%
11,1%
47,2%
33,3%
0,0%
5,9%
29,4%
41,2%
11,8%
11,8%
6,9%
6,9%
31,0%
44,8%
10,3%
0,0%
0,0%
35,3%
52,9%
11,8%
,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
totally disagree
disagree
agree with
reservations
agree
totally agree
CAB
PMA
FPB
STB
0,0%
11,8%
35,3%
23,5%
23,5%
5,9%
8,3%
22,2%
41,7%
27,8%
0,0%
6,9%
10,3%
34,5%
41,4%
6,9%
0,0%
0,0%
41,2%
52,9%
,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
totally disagree
disagree
agree with
reservations
agree
totally agree
CAB
PMA
FPB
STB
FPB
FPB
PMA
PMA
CAB; STB
STB
CAB
13
perception is mainly assigned with “reservations”, being the most negative bank evaluation.
Concerning the knowledge about CSR programs adopted by the bank results reveals that clients
are unfamiliar with CSR initiatives showing, in general, high levels of reservation. Commercial
banks clients (FPB and STB) indicate higher levels of unawareness.
Table 7 – Customer’s perception about communication alignment
Concerning bank’s choice and possibility to advice to friends or relatives, CAB gathers the most
favourable set of costumers. They all believe they made the right choice with a high possibility
of recommendation. STB and FPB are the institutions in which clients raise more doubts in
advice their bank.
TD
D
AWR
A
TA
60%
TD
D
AWR
A
TA
50%
40%
30%
20%
10%
0%
60%
50%
40%
30%
20%
10%
0%
STB
FPB
CAB
PMA
Customer’s knowledge about CSR programs (Sig = 0.081 )
communication alignment (Sig = 0.28 4)
TD: totally disagree; D: disagree; AWR: agree with reservations; A: agree; TA: totally agree
Legend
14
Table 8 – Customer’s perception about bank’s choice
Sig = 0.082
2.3.5 EVALUATION OF BANKING INDUSTRY IN SOCIETY
The first question focuses on banking contribution to solve the challenges that the various
sectors of the Portuguese economy face such as unemployment, poverty, education and health.
The second question aims to know if in their opinion the sector is fighting to contradict the flow
of influences, both the supply and the demand side of the bribery transactions and corruption in
the private and public sphere. Relating these two issues, respondents believe in banking
responsibilities in helping Portuguese society collective problems, but the same respondents
systematically shows no conviction that the sector is fighting against greed and corruption, as
shown in the Table 9. The clients from CAB reveals as the most sceptical concerning the sector.
Table 9 - Costumer’s perception on banking industry
Sig = 0.023 Sig = 0.623
totally agree
and agree
agree with
reservations
FPB
STB
PMA
CAB
58,8%
50,0%
69,0%
88,2%
23,5%
30,6%
20,7%
11,8%
17,6%
19,4%
10,3%
totally disagree
and disagree
23,5%
13,9%
20,7%
23,5%
41,2%
38,9%
55,2%
35,3%
35,3%
47,2%
24,1%
41,2%
FPB
STB
PMA
CAB
64,7%
63,9%
44,8%
29,4%
29,4%
22,2%
51,7%
35,3%
5,9%
13,9%
3,4%
35,3%
totally disagree and disagree
totally agree and agree
agree with reservations
Expectation about banking contribution to solve the
challenges that the various sectors of the Portuguese
Perception concerning banking contribution to avoid traffic
of influence, bribery transactions and corruption
15
2.4 FINDINGS FROM THE INTERVIEWS
2.4.1 PROFILE OF CSR PROFESSIONALS IN PORTUGUESE BANKING
Respondents are currently engage in CRS of the analysed bank with involvement in those
activities for more than 4 years. They are aged between 35-50 years from both genders. They all
have attained a higher level of education in management (STB and FPB), sociology (CAB) and
law (PMA). A common characteristic either on their current function or background from STB,
FPB and CAB professionals is a strong connection to public relation and marketing with
particular emphasis in brand management activity. They all are supervised by president or
administration of banks group. All the participants’ banks has a specific department where CSR
in controlled and implement with a budget varying between € 1.5 million to € 5.5 million.
2.4.2 KEY FINDINGS
The formal involvement of external stakeholders in decision-making process is not applied in
the corporate governance model of the participants’ banks. CAB adopts voting at general
meetings that includes one representative from each of the member branches.
Stakeholder’s needs were identified in the diagnostic reports11 produced concerning the
Common Strategic Framework 2014-2020 for Europe. The areas that require a priority
intervention are unemployment and poverty, education, community support structures for
children and elderly, mental health and environmental practices associated to housing. Those
areas encompass a wide range of financial services (e.g. savings, credit, insurance, etc.).
Respondents were not able to provide detailed information (product characteristics, target,
communication channels) about any of the specific existing services per area in order to meet
the risks and challenges in the Portuguese economy. For example, they have mentioned the
impact of internal environmental programs (applied on their own bank) that can often be
measured quickly with traditional business metrics such as cost efficiency, rather than
environmental practices that aims to address the identified need.
PMA did not answer the qualitative questions stating that the Group is a social economy
organisation; the bank also strengthened the idea that PMA Foundation is private institution of
social solidarity and it is the CSR dimension of the Group. Therefore, complementary
information was gathered on bank’s CSR website12 and annual reports.
11 For the purpose of this study were only queried the reports of the regions involving the branches where the questionnaire was
applied, Lisboa and Setúbal (The Lisbon's Regional Action Plan 2014-2020, http://www.ccdr-lvt.pt/pt/plano-de-acao-regional-
lisboa-2014---2020/7897.htm; Strategic Development Plan for the Setúbal Peninsula, AMRS - Associação de Munícipios da
Região de Setúbal, February, 2013).
12 http://www.montepio.pt/SitePublico/pt_PT/institucional/responsabilidade-social.page?, March, 2014.
16
The mainstream financial sector focuses on responsible investments, which include aspects of
socially responsible investment (SRI)13 and impact investing14. With the exception of FPB the
other banks offer impact investment programs (microfinance, social business and community
investments) but again, respondents were not able to answer the control questions (customer
segments, amount allocated and revenue). However, they all agree that those programs are part
of CSR banks policy identifying the development of local community as an important
motivation. The lack of expertise and risk concerns was mentioned as the biggest barriers to this
type of investment.
About half of customers in developed countries and 84% in emerging countries opened a new
banking product over the past year (Bain & Company, 2013). The survey included qualitative
questions about the responsibility of the bank in changing costumer’s consumption patterns. We
have also suggest it as a differentiate factor for the customer retention. The interviewees focus
on financial literacy to help customers gain the knowledge and skills to make responsible
financial decisions. While STB, PMA and FPB provide online tools to strengthen the financial
literacy, CAB initiatives are focused to primary students establishing partnerships with the local
schools. FPB also refer that granting credit approval depends on a more demanding criteria.
Another objective was to determine which areas are given most priority by institution in the
allocation of funds for CSR. With exception to CAB, education is the consensual area
mentioned. STB also mentioned culture; PMA referred social inclusion and CAB the link with
their associates and SME’s. In terms of the brand value education and culture are considered the
most important ones. CAB mentioned the bank signature which is “the national bank with local
pronunciation”.
We asked participants to share how they feel about the crisis of legitimacy (deep associate with
lack of transparency, corruption and influence traffic in private and public sphere) and also
inputs on actions that have been undertaken by corporate governance structure to improve
society confidence on banking. Respondents preferred to not express their personnel views.
STB and FPB mentioned that the board of directors is charged with overseeing management’s
strategy and performance emphasizing the presence of non-executive director’s members on
board. CAB mentioned that the Group had a positive evaluation by the “Troika”15 as well as
workshops promoted for the clients aiming disclosing the bank activity.
13 SRI - socially responsible investment combines investors’ financial objectives with their concerns about Environmental, Social
and Governance.
14 Impact investments are investments made into companies, organizations, and funds with the intention to generate measurable
social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed
markets, and target a range of returns from below market to market rate, depending upon the circumstances. (Global Impact
Investing Network (GIIN), “What is Impact Investing?” http://www.thegiin.org/cgi-bin/iowa/investing/index.html#1, March,
2014).
15 The term Troika is used during the Eurozone crisis to describe the European Commission, International Monetary Fund and
European Central Bank, who formed a group of international lenders that laid down stringent austerity measures when they
17
Respondents were asked to prioritize their stakeholders according to Clarkson’s typology
(1995). They all mentioned their shareholders as a priority public with exception to the state-
owned bank that did not mentioned the Government that appears as secondary as mentioned by
the private banks. The common primary stakeholders are clients and employees. Society appears
as primary for PMA and CAB.
3. SUMMARY AND CONCLUSION
CSR has been a theme that emerged from the heart of business structure and has been adopted
by Portuguese banks clearly with a strategic orientation of legitimacy. Yet, leaders encourage
isolated activities that come closest to USA example in which “CSR often seems like an add-on
and commonly criticized” (Bowie, 2012: 182) instead of an holistic approach. CRS initiatives
are displayed through communication in order to enhance organisational legitimacy with two
different approaches. In STB, FPB and PMA communication efforts are used to alter socially
defined values, rather than a driving force to align these institutions present interests and
practices with the norms and values that society strongly holds. CAB benefits from operate
under the cooperative business structure and counteract the tendency to territorial centralism.
Through its support to local and community-driven programs their legitimacy process brings
less disruption to the costumers trust than in commercials and saving banks. Costumer’s
knowledge about CSR reflects that the awareness levels of CSR activities are low, despite the
fact that banks continue to take an active role in promoting their CSR activities. CSR priorities
towards a positive effect on financial performance unlike the perception concerning the sector
intervention on other dimensions, namely social. This aspect allows concluding that interests of
stakeholders have not been taken into account, since their confidence in banking contribution to
solve Portuguese collective problems is not followed by CSR effective practices, which
necessarily weakens its legitimacy.
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