7. Concluding remarks
through their implementation and continuous development of Financial Literacy programs.
These are likely to raise moral legitimacy as the banks use their core competencies to create shared value. However, their hidden agenda and focus on youngsters may seem too extreme and can create negative attention. Another strategic move taken by both firms, though slightly different in scope, is their modification of incentive structures with the aim of mitigating agency problems, appearing more transparent and less greedy. Modifying incentive systems can be viewed as the right thing to do, but if old practices are re-implemented as soon as the market has cooled down it is likely to backfire on the banks. In order to repair pragmatic legitimacy following irresponsible behavior the banks needs to convince the market that they no longer has an incentive to act unethical.
The CSR managers of the case firms find that a common framework within CSR would be highly useful in order to solve industry challenges. The two banks engage heavily in CSR networks like UN’s Global Compact, the Equator Principles and UNEP-FI among others, seeking inspiration and heightened knowledge through meetings, seminars and workshops.
The effect of isomorphism on repairing legitimacy and reputation in the sector can be multiple: Cooperating on initiatives and imitating competitors can certainly create synergies and improve the efficiency of banks. If all banks should work individually on CSR issues, it would be a cumbersome and costly process.The increased expertise that firms gain by joining business coalitions may enable them to better advice clients and control risks. However, the large number of standards that banks engage in could make it hard for stakeholders to assess and compare their actions. A lack of transparency, which is a crucial factor in stakeholders’
assessment of banks, could undermine the process of repairing legitimacy.
Furthermore, a consequence of being institutionalized and homogeneous is that formal structure elements, such as core values become general or vague and similar to other actors within the field. Differentiating CSR initiatives may be necessary for the individual banks to surpass the reputation of the sector as a whole and thereby strengthen the firm’s competitive position. If the trend toward homogeneity continues, CSR initiatives implemented by the case firms may be termed business as usual and the public may question the degree of sincerity and true accountability of banks’ CSR initiatives.
7.2 Limitations
The qualitative research method employed in this thesis is not designed to give a fixed conclusion. Instead, my findings make the conclusion more advisory than absolute. The limitations of this thesis were dealt with in the methodology section. This part of the thesis aims at summarizing the main points.
As earlier noted, there are a huge number of stakeholders linked to the activities of banks.
This thesis has concentrated on public policy and public opinion. This has been necessary in order to limit the scope of the thesis, but it may fail to give a comprehensive picture of the external and internal pressures that banks experience.
The secondary sources applied in this thesis can potentially weaken the credibility of the findings as the specific purpose might differ from the purpose of the research project at hand.
Furthermore, focusing on the CSR actions of two banks makes it hard to generalize on behalf of the findings. I have incorporated cases from other institutional settings in order to build a stronger argument, but a quantitative study of a representative number of banks would be necessary in order to create new theories. Lastly, concentrating on the views of the CSR practitioners in the case banks may fail to give the holistic view of the organizations. The findings could appear different if executives from other departments or other employees from the operative level had been interviewed.
7.3 Putting the paper into perspective
Banks have experienced a crisis of responsibility, or the lack thereof. Legitimacy and reputation will only be repaired by the re-establishment of trust between firms, especially those in the financial sector, and with their stakeholders. To move away from the bad
reputation of greediness and fraud, banks need to continue their work on strategic CSR. Some may use it as window-dressing initiatives, but in order for it to create credibility and trust it has to be aligned with the firm’s strategy and business practice. The financial crisis and cases of irresponsible banking may be the beginning of an ethical era, with an enhanced focus on CSR.
In terms of future research, it could be fruitful to interview with banks operating in different institutional environments to assess the differences and similarities in stakeholder pressure,
the degree of isomorphism, how banks use CSR in dealing with organizational crises, and ultimately how CSR can be useful in efforts to repair legitimacy and reputation. Differences between large and small banks could also be investigated as well as firms facing varying levels of legitimacy and reputation threat.
Another area that could be worth examining is how homogeneous CSR initiatives in the banking sector are viewed by customers and other stakeholders. Whether the heightened expectations from stakeholders demand banks to implement unique approaches, or if copying the mainstream is sufficient, could be interesting to assess in connection with legitimacy and reputation. The CSR developments in the coming years will also be interesting to follow, as new regulations are likely to change practices in the banking sector. Whether the sector intends to continue their development of CSR in the future, or if they will return to old practices as soon as the market cools down, could also be a relevant topic for future research.
A relevant case nowadays in terms of legitimacy and reputational damage, yet in a different sector, is BP’s recent oil spill in the Mexican Gulf. As oil firms to a lesser extent than banks trade directly with consumers, the cases are less comparable. Nevertheless it could be interesting to examine how CSR can be useful in counteracting the organizational crisis that BP is experiencing nowadays.