Sustainability: Company´s CSR – Santander
Business Study
Santander is the focal bank of the Santander Group. It originated from Santander, Cantabria in Spain. In 2009, the bank’s net ordinary profits were over 8.9 billion euros with a distribution of more than 4.9 billion euros in dividends to shareholders. According to its official website, Santander claims to adopt a 5-pillar customer-focused business model that includes commercial focus, efficiency, geographical diversification, prudence in risk and capital discipline, and financial strength.
Santander offers its customers a wide range of financial products and services through its 13,660 branches, which is considered to be the largest branch network in international banking. It is the 4th largest bank in the world by profits and 8th by stock market capitalisation. Santander has maintained an international presence through its geographical diversification between developed and emerging markets. It is present in 9 major markets which are Spain, Portugal, Germany, the United Kingdom, Brazil, Mexico, Chile, Argentina and the United States. Its website claims that in most of its international markets, the bank has attained high market shares in retail banking. It is also positioned as one of the most highly valued brands in the finance sector – according to the consultant Brand Finance, it is ranked 3rd in the world. (Source: www.santander.com)
Santander still gained profits during the past year even though its profits had decreased 8,5% compared to the previous period. In the figures below, the main source of its financial gains came from the UK, Germany and Latin America. This is due to the fact that these regions are developing a lot (especially Latin America) and the people there still ask for loans from the bank as opposed to Spain or Portugal, where no new enterprises are opening due to the high instability of their economies. This is so because the production of the countries that invest in creating new enterprises is rising and they can export more in order to increase the growth of their economy.
(Click on the link below for more information:
Stakeholder Study & CSR Strategy Developed by the Company
Santander’s principal stakeholding groups include the customers, shareholders, employees and suppliers, who, through their work, contribute to strengthening relations between the Group and the communities in which it works.
In the current environment, Corporate Social Responsibility (CSR) is more important than ever for contributing to sustainable development based on a lasting relationship with stakeholders. This is why Santander’s business model is based on stable relations with customers, employees, shareholders and suppliers as a whole.
It has been identified the main needs and interests of Santander and its stakeholders as displayed in the table below:
| Stakeholders: | Shareholders | Customers | Employees | Suppliers |
| Santander wants… | Capital
Good governance Loyalty |
SalesLoyalty | ProductivityLoyalty
Quality work |
Stable relations and contractsLoyalty
Good balance price/quality products |
| Stakeholders want… | Transparency, good reputationGood balance profit/risk
Sustainable stock market indexes
|
Quality of serviceSustainable products
Socially responsible investment |
Job stabilityTraining
Social benefits Diversity and work-life balance CSR
|
Equality of opportunityTransparent buying processing
Social and environmental requirements in products and services |
However, the bank has also faced some challenges in maintaining its reputation by being involved in recent “scandals” that have caught the attention of mass media:
1. The Madoff Case:
In 2009, Santander’s reputation was tainted due to its relation in the case of the biggest fraud in corporate history involving Bernard Madoff, who was accused of running a massive pyramid scheme by using cash from new investors to fund payments to earlier clients.
Before the case was exposed, Santander had praised Madoff for his “impeccable” timing and in one of its reports, the bank’s fund management arm, Optimal, informed its institutional investors that Madoff had an ability “to find great entry and exit points to benefit investors”.
Santander’s Swiss-based fund management business was one of the biggest investors in the hedge funds run by Madoff. The Swiss bank, M&B Capital Advisers, marketed the Madoff funds.
Santander clients were considered to be some of the biggest victims of Madoff’s alleged $50bn (£37bn) fraud, and the bank faced prospects of being sued by investors who have lost money.
Spain’s top anti-corruption investigator launched an investigation into how such a large exposure could have been built up without triggering Santander’s risk controls.
(Source: http://www.guardian.co.uk/business/2009/jan/23/santander-praised-impeccable-madoff
http://www.guardian.co.uk/business/2008/dec/21/madoff-santander-shares)
2. Tax Fraud Allegations
In 2011, Emilio Botín, chairman of Santander and eleven other members of his family was investigated by Spain’s high court over allegations of tax-related offences. This was a result of the information provided by French tax investigators to the Spanish authorities about Spanish clients of HSBC’s Swiss private bank who had misreported income during the period of 2005-2009.
According to the Financial Times, the family “voluntarily paid €200m ($283m) to settle an outstanding tax bill over an account that is the focus of the investigation.”
The article reported that no specific charges were brought against the Botín family. Nevertheless, the investigation probed Mr Botín, his brother Jaime, and their combined 10 children, including Emilio Botín’s daughter, Ana Patricia Botín, who is chief executive of Santander UK.
Apparently, the investigation was related to an account set up in 1937 by Emilio Botín Snr, who died in 1993. He had used the account to keep a portion of the family’s wealth during the Spanish civil war. According to one person close to the case, the account was left dormant with no funds taken in or out since the death of Mr. Botín Snr.
However, it came to the attention of Spanish tax authorities in 2010 during an investigation into 659 Spanish accounts of HSBC’s Swiss private bank.
The Botin family claims that it has met all its tax obligations. The investigating judge, Fernando Andreu, said the complaint was brought in order to fully assess whether the tax settlement by the Botins had been completed. If the declarations provided were satisfactory, the case would be thrown out.
Mr. Emilio Botin bid the National Court to block three groups’ (Ciudadania Anticorrupcion, Asociacion Contra La Corrupcion Sistemica Y En Defensa Del Libre Ejercicio De La Acusacion Popular and Manos Limpias) ability to file complaints against him over accusations he broke national tax laws by hiding funds in Switzerland. Earlier this year, it was reported that he had lost the bid. In Spain, any citizen can make a so-called popular accusation in legal proceedings even if they are not directly involved in the matter.
On top of the tax evasion allegations, the CEO of Santander, Alfredo Sáenz has been given an 8 month prison sentence and a 3 month banking industry ban by Spanish court in March 2011.
(Source:
http://www.ft.com/cms/s/0/50fcb544-9820-11e0-85e9-00144feab49a.html#axzz1kPtlzcE0
http://www.campdenfb.com/article/santander%E2%80%99s-botin-family-faces-tax-fraud-allegations
http://www.theolivepress.es/spain-news/2011/03/24/jail-for-spanish-bank-boss/)
The “scandals” mentioned above have definitely affected Santander’s reputation but some may say that it didn’t seem to make a great impact on its business because the cases were not that well known on the international level. Hence, although they may have lost some clients, it didn’t really affect the increase in number of clients that continued to place their trust in Santander.
Nonetheless, to satisfy its stakeholders’ interests, Santander realizes that sustainable business also means knowing how to respond at each moment to the real needs of stakeholders in order to keep stable and lasting relations with them. Santander tries to achieve this through implementing CSR strategies for each of its stakeholders through:
• Shareholders – always striving for the best return, with the maximum transparency in information via continuous and fluid channels of dialogue, and fostering their participation in the Group’s trajectory.
• Customers - providing them with the best products and services, with constant innovation and particular attention paid to socially responsible products.
• Employees – having training and development programmes, fostering equality of opportunity and the work-life balance.
• Suppliers – promoting transparency in the awarding of contracts, with relations based on mutual respect
Some examples are given in the table as below:
| Stakeholders: | What do Santander do to satisfy the stakeholder’s interests |
| Shareholders | Return on share above the sector´s average
Good transparency Chosen as the “best bank in Europe” in investor relations by the magazine Institutional investor |
| Customers | Local incentives to increase satisfaction
Microcredit programmes Programmes for immigrants SRI products Launch of the retail banking corporate School |
| Employees | 99% of the contracts are permanent
7.7 million training hours in all the Group Corporate policies for development, assessment and remuneration Co-operation agreement with Unicef |
| Suppliers | Homologation criteria unified
E-platform for purchases/tenders via internet and management Implementation of external auditing |
Conclusion & Recommendations
Santander has managed to grow and expand its business, even during the current economic crisis. However, its reputation has been tarnished due to the scandals that involved the bank. Nevertheless, the bank seems to be making efforts to improve its CSR, which is very important now that it has lost some credibility among some of its clients. In this case, CSR has been utilized to improve Santander’s presence and repair its image not only for its direct stakeholders, but also for the sake of public perception with regard to the way it manages its business.
Santander should apply policies of transparency in all its business activities so that clients and investors can clearly see how it conducts business and judge for themselves if its actions are responsible or not. However, it is interesting to see that part of its policies have resulted in 99% of its employees’ having permanent contracts. In this regard, Santander may want to consider increasing a certain percentage of employees under temporary contracts. The reason is because as a bank, customer service is very important and Santander still has much to improve in this department. If employees who deal directly with clients are placed on temporary contracts, the contract can be renewed and later promoted to permanent contract, only when employees demonstrate a good standard of work that is expected of them. As result, customers will be happier and together with its other programmes that involve benefiting the society, perhaps Santander will be able to repair the damage caused by its past mistakes, and make better efforts to improve the way it runs business.
GROUP 4
Alexandru Nicolae Cosor
Nur Syafrina Mohd. Sharif
Laura Navas Valle
(Sin Valorar)
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03 feb 2012
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Laura Navas Valle
MIGMAmad, Sin categoría /
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