Part 1: Objectives and Research Approach

Topic Area Selection

Corporate social responsibility also known as CSR is an element that
highlights the overall scenario of any business including ethical
obligations attached to it. The overall performance of any business is
directly connected with the financial history that is just important
component of CSR. Organizations and businesses are not connected
with profits only; it also highlights the executive strategy of satisfying
citizens too. It also focuses the obligations with which the overall society
can be linked with the key factors of any organization. Business is
therefore linked with the tools with which overall strategy can be
enhanced (Solomon, 2007).
While profit generating, business aim is to signify the areas that should
be neglected and this is the only way with which overall business
environment can be enhanced too. Employee welfare system need to be
evaluated with which overall business sector can be adopted (Dobson &
Saiz, 2006). If employee welfare system is not working properly, humans
as well as overall environment can be ruined. Therefore, it important is to
see how accountability is working and by what ways proper areas can be
catered (Crowther, et al., 2008).
Corporate governance is known as a method that tells about activities
with governing mechanism with implementation of proper strategies that
should be used to highlight the tasks as per the strategic point of view.
CSR is therefore termed as an important element with the help of which
overall business environment can be enhanced and by what major
optimal outcomes can be generated. On the other side, CSR is known
as a method with which organizational activities can be highlighted and
society, environment and other areas can be enhanced too. It implies to
consider nature of environment working around organization and by
what ways things can be moulded accordingly.
Selection of Organization
PSO is a company that focus on the marketing and selling of petroleum
and it is related with its linked products too. This company is also based
on the storage, procurement and marketing arena of the petroleum
based products that include furnace oil, natural gas, LPG and many
other related products too. The customer portfolio comprises the
autonomous bodies, government agencies and many other areas with
which companies can perform in a dependant manner. The company

was generated on 30 December 1976 and its headquarter is based in

Karachi. In the Forbes 2000, it is included in the list of Global 2000
(Forbes.com LLC, 2014):
PSO is the biggest oil marketing based company based in Pakistan and
it is interrelated with the marketing, storage and distribution of different
petroleum based products that is reason of choosing organization. Paper
aims to highlight how this company is working regarding CSR
(Brecorder, 2015).
On the other side, Shell Pakistan Limited is engaged in the business of
oil and gas it is part of worlds leading organization that recognize the
ways in order to meet the needs of the customers. It is therefore
important by what ways and methods proper competitive advantage can
be maintained for optimal outcomes. As mentioned earlier, corporate
governance and CSR policies should be adopted properly to further
connect the outcomes. This research is therefore designed to highlight
the risk management areas and by what ways proper working can be
done. Here are some questions that are linked with the research that
further connect the scenario of the entire research too.
Research Questions and Objectives
Impact of this paper is to highlight the CSR areas related to PSO
industry. Report has to account how PSO is minimizing social risk while
highlighting critical performance indicators related to stakeholders of
PSO and recommending the ways that can enable organization to
optimize its CSR efficiency. Future of PSO has strong association with
the factors of globalization and the impact of vulnerability can be
highlighted too. Companies can focus on the competiveness of the
business arena too and this factor can improve the cause of companies
existence.
Below mentioned are the objectives of this paper:
i.
ii.
iii.
iv.
v.

To highlight the importance of CSR in the industry of oil and gas industry
of Pakistan
To critically analyse CSR initiatives undertaken by PSO in Pakistan.
To examine PSO social responsibility strategy compared to benchmark
company the Shell Pakistan.
To assess impact of PSO corporate citizenship on its stakeholders by
applying corporate governance and Carroll pyramid model.
To recommend alternate options to improve CSR campaign of PSO in
order to effectively satisfy its stakeholders.

Some questions as emphasised in this research are mentioned below:

i.
ii.
iii.
iv.
v.

How CSR strategy of PSO along with objectives are pursuing its mission
and vision statement?
What is corporate governance mechanism of PSO and how well it is
performing in pursuit of organizational objectives?
How actions and operations of PSO are impacting its stakeholders?
What kind of CSR initiatives PSO is undertaking and what is
effectiveness of those actions?
What strategies should be adapted by PSO to improve community
welfare and corporate environment?
The paper has adopted research method that is secondary research
approach with descriptive in nature as well as comparison of study is to
be done to highlight the critical questions accordingly. The topic is also
linked with the overall performance of the report and it highlights the
areas with which proper focus can be done too. Furthermore,
quantitative as well as qualitative analysis is done for further analyse the
oil industry of the Pakistan.

Part 2: Data Collection Methodology

Data Gathering Process
This research is conducted to optimize second hand sources with which
information can be gathered accordingly. Secondary sources enable cost
effectiveness and working efficiency is achieved. likewise, evidences are
collected with which articles, journals and other texts can be focused.
Moreover, annual reports and sustainability report of PSO and Shell
Pakistan is collected to highlight the key performance and to further
know the working policies of the companies.
Corporate Governance as CSR
CSR and corporate governance are two important features of any
business and it helps in maintaining the proper check and balance

situation and this is the only way with which overall corporate
governance areas can be maintained too. Corporate governance is
known as a method with the help of which activities can be regulated
and proper strategies should be used to highlights the tasks as per the
strategic point of view (Dima, et al., 2008). Therefore, it is important to
see how environment is working and the ways things can be moulded
accordingly.
CSR and corporate governance are interrelated with one another and for
this specific purpose; organizations almost highlight the areas with which
CSR can be linked with the organizations. It is therefore responsibility of
the board members to take right decision at right time to avoid any
discrepancy and to enhance the outcomes too (Crowther, 2008).
In order to suitably understand the CSR and corporate governance
areas, proper as well as thorough analysis is required in order to see
how both areas can be linked with one another (Dima, et al., 2008).
Various areas are also catered to ensure the possibility of the aims as
well as objectives and this way can easily ensure the fulfilment of the
objectives in proper format. CSR thoroughly defines the aim of a
company and it highlights the profit arena too. In order to ensure the
practices of CSR, important is to see whether all the policies are
followed properly or not. This stated model is therefore used to enhance
the correlation that exists between CSR and corporate governance and
four basic areas are highlighted in this model i.e. strategic governance,
stakeholder capital, human capital and external environment.
The stated model above will enable to examine the actual phenomenon
of the corporate governance along with CSR and how four basic areas
are link with the outcomes of the company.
Strategic Governance Policy
Strategic governance and corporate policy is all linked with proper
measurement and planning. In order to add in innovative ideas,
important is to highlight how corporate governance ideas can be
enhanced. Proper performance and other strategic techniques are
important that are enabler to critically review organizational governance
approach so organizations can generate outcomes properly (CSR
Books, 2011).
Human Capital Strategy
In any organization human capital is known as the main strength and it is

important to highlight the facts with which entire organization can

generate optimal outcomes. Human capital is also linked with the CSR
and corporate governance areas and it enhance the healthy relationship
of a company too. With the help of enhanced relationship, employees
and employers can work in a healthy environment and this is the only
way with which overall outcomes can be generated in an orderly manner
(Dima, et al., 2008).
Stakeholders Capital
The basic objective to run a business entity is to make better return out
of it and maximize the wealth of its stakeholders. In the list of the
stakeholders of a business, there come the suppliers, customers and
every directly or indirectly related person or entity in the external
environment (Amran & Haniff, 2011). A business has to maintain a
balance between the objectives of its different stakeholders, to not only
fulfil these objectives efficiently but also go for the ultimate objective of
doing a business.
Environment
The business has to take in account the factors from not only its internal
environment but also from the external surroundings. This is because
with what action business decides to purse, it has the consequences on
its environment and if the organizations neglect this aspect of their
decision making they may find themselves in the situation where the
face some strong reaction from the society not tin their favour. That
could be very devastating for the organizations as the environment is the
platform for the business to initiate and pursue for its future progress
(Dima, et al., 2008).
Now to understand the concept of the impact of the business operations
on its environment, we may need some measurable variables to study
but alone this information could be of little use for us, unless we follow
some defined frameworks to study it.
Qualitative Case Study
In those prospective frameworks one could use a case study to analyse
the impact of the qualitative factors with operations on environmental
surrounding. The researcher may find the case study approach quite
helpful to follow while understanding something as this method gives not
only the detailed practical life example to understand some facts but also
assists at the points where the readers may need little information to
consider (Zikmund, et al., 2009).

But like other frameworks, this approach is also met with the criticism
from the different users as they said that the selection of the case study
is vital to understand the situation faced at the time and it is practically
not possible to find the two alike situations to draw a best conclusion.
But still this method is quite acceptable in the circles of the analysers as
it give them some guideline to follow in a given situation (Louis, et al.,
2007).
Benchmarking
The other method could be the use of a benchmark as Shell Pakistan
against PSO. This method involves the selection of predefined standards
set in by the industrys best performers to be followed by the others.
These standards may involve the procedures the companies follow to
formulate their policies, their way to implement those policies, the
management of their financial assets etc. These benchmarks can help
the organizations to follow the best practices in the industry to get the
best results (Cheney, 1998).
The Carrolls CSR Pyramid Model
This pyramid, presented by the Carroll composed of the four basic
blocks that includes the economic, legal, ethical and philanthropic
responsibilities of a company. The pyramid is well known benchmark
among large number of companies working in the exploration sectors
like in oil and gas division but is also used by global retail business
giants like Wall-Mart (USA), Carrefour (France) and Tesco (UK) etc.
(Woemann, 2013).
This model defines the responsibilities of a company in the different
areas, where the stakeholders of that company want better response
from their company in the areas of economic return, legal obligation,
ethical actions and charitable activities (Crane, 2008). In the economic
responsibilities, the shareholders want the company to make profits and
give better return on their investment. The legal responsibilities include
the behaviour from the company to obey all the set rule and regulation of
a society and perform its business in an ethical way to fulfil its ethical
responsibilities. The last but not the least is the philanthropic
responsibilities that includes the charity from the company for the
betterment of its society like build hospitals, parks and schools etc.
(Keinert, 2008).
Figure 1 Carrolls CSR Pyramid (csrquest.net, 2011)

Limitations
Like every model or tool, this model also has some limitations like many
of the users of this model highlight the fact that this tool ignores some
other important facts in its discussion to achieve the targets like internal
strengths of business etc. They further said that this model gives the
areas that require balancing of progress but it does not define the term
balances in the model. Further this model provides the general
guidelines to the business organizations to follow in all situations and
ignores the situations faced by the business itself. The four blocks
mentioned in the model has inter crossed impacts that could not easily
be resolved in some complex situations (Huniche & Pedersen, 2006).
Research Ethics
These are the guidelines to be followed while conducting some research
on a topic or matter,
In the process of getting assistance from a source, the researchers
should take in account the extent to which they are using or
regenerating the same information from the source as to keep it as
minimal as possible.

 If the researcher uses the information from the other source, it

should be properly referenced to the original source.
The conducted research should be on neutral basis and must not
give unjust favour to an individual, society or the group.
If the researchers are using the information from some copy right
protected data, the prior consent of the author(s) should be
obtained to avoid any breach of ethical aspect.
Research Limitations
We have faced the follow problems while conducting the search for the
information on the topic,
The limited number of information resources were available to
collect the information on the given topic, so no much detail
discussion is included (Krysik & Finn, 2013).
As the company is a giant in the local market, so they withheld so
of the necessary information to protect its interest in the market.
The sources of information we have used to present the analysis
were written in the different context to our research, so at some
point we had to heavily depend upon our judgments to conclude
the results (Kumar, 2008).
This whole process of information gathering, summarization and
presentation was a time consuming practice to conclude.

Part 3: Analysis, Conclusion, and Recommendations

CSR Scenario of PSO
Adekola & Uzoagu (2012) state about social responsibility that amounts
to voluntary responsibilities of PSO that is not discharged by just
complying with law. It is evident that CSR is regarded as an outcome of
public pressure enforced on account of company operations that might
affect to human rights, environmental sustainability and employee issues
(Adekola & Uzoagu, 2012)
Figure 2 (Ajibo, 2015)

PSO can demonstrate its brand as socially responsible if company

engages in sustainable investment and it treats its stakeholders like
shareholders. Company lays down voluntary regulations where it has to
engage in community development programs. In addition, company has
to perform well above the local applicable laws of oil and gas industry
while acting as role model for competitors. It implies that self-governing
regulations should be slightly higher than coercive regulations imposed
by government and legal system of country. PSO is performing CSR
services in health, safety and environment; assuring quality; and

education. PSO is underperforming in the area of voluntary regulations

or standardization where it has considered above activities as enough to
discharge its social responsibility (Figure 2).
However, the parent organization of Shell Pakistan has adopted
voluntary disclosure practices while complying global reporting initiative
(GRI). Shell Petroleum has established reciprocal relations with
communities that are situated with oil business operations of
organization that is preferred strategy for PSO to penetrate its presence
among communities (Abubakri, et al., 2014).
Civil society in Pakistan has gained adequate awareness whereas there
is civil regulatory that aims to bring change (Hands.org, 2015). The
civil society is regaining and involving the interests of suppliers, buyers,
larger society, local community, workers, business managers and other
stakeholders so making charity is no longer enough to discharge
corporate social responsibility (Moharana, 2013).
Likewise, there is greater need of corporate citizenship on the part of
PSO as civil society of Pakistan is more organized and aware of their
interest than ever (Waheed, 2005). Pakistan State Oil has to perform
well on the part of triple bottom line but it may be materialized by
changing organizational structure and culture. SECP directions are
applicable on PSO being the public company to improve its governance
problems (Onepakistan.com, 2012).
PSO Mission Statement
PSO has established precise and robust vision statement by focusing on
never ending energy needs of consumers where it wants to be dynamic
and innovative to adapt market conditions. PSO has shown its
eagerness to deliver its customers its services with the differential
approach to its competitors and meet both of their current and future
demands (PSO , 2016b). The second part of the vision seems to be
fulfilled by the company when it entered in a contract with the Qatar to
import the LPG but the initial part of the vision (Kiani, 2016). It seems to
be lost as the company has been in condition to loss its stations to the
other competitors and also it has no major presence in the shipping and
airplane transport industry of the country.
In its mission statement it has focused to provide a better, honest and
friendly environment to its workers but it seems that the company had
not been able to keep itself with its mission statement in view of recent

actions against its officials. But the part of giving better return to its
shareholders seems quite attained objective of the company. It is
arguable that PSO needs autonomous governance to achieve consistent
approach towards its vision and mission statement.
On the other hand, Shell has a broader vision to work at the mega level
and being the best refinery in Asia and it has worked harder to achieve
its vision by expanding its operations where company has made
sustainable development as part of its strategy (Shell, 2016a). Its
mission to provide the better environment for its customers and suppliers
seems to be fulfilled as it has not only attracted a large numb of
customers but has also good feedback from the suppliers.
Corporate Governance as CSR
PSO is currently the largest company in the country to meet the local
energy demands but still it has not used this strategic strength to flourish
as it has to face a lot of issues in its governance system. The company
has to face a lot of criticism and legal action from law enforcement
authorities on the charge to sell its products to the rival company and
thus lost the market share (Rana, 2012). The problem not only confined
to this but also they have to write off the material amount of their
receivables as bad debts, that has seriously hit the company in financial
terms and it has to ask the government for a support of PKR 80 billion
for its working capital cycle (Khokhar, 2016).
At the governance level of the PSO, there exists a board of finance and
risk management committee that includes the three board members,
company secretary and the board chairman (PSO, 2015). The
responsibility of these members is to study the prospective plans put
forward by the finance board and assess the risk associated with the
plan to minimize it by performing the below mentioned duties (PSO,
2014):
They review the future operational and financial plans of the
company.
The potential plans put forward by the company management to
undertake any new project.
Reviewing and approving the business budgets for the future
years.
Involve in the discussion of the formulation of any new policy and
then look for its weak points to cover it properly.
They study the impact of the implementing new policy in the

company and what measures took by the company management

to overcome those problems and also provide their own
recommendations where necessary.
Audit & Compliance Committee
This committee at PSO includes the three board members, chaired by
the board chairmen, who must have a financial background to undertake
and asses the task of this committee. Like the finance and risk
management committee, this committee also has a wide range of
responsibilities to perform as (PSO, 2014):
Their foremost duty is to undertake a company extensive overview
of the health and safety, legal and quality compliances.
They are responsible to manage a channel of communication
between the company management and the external auditors to
conclude the annual audit on timely and decent manner.
They have to review the company policies on the compliance with
the applicable law prevailed in the industry and the general
regulations to be expected by the company to follow.
They also assist the company management to maintain their
quality level in their products expected by the customers.
Strategic Governance
PSO has experienced selling of its product to low credit worth entities
and competitors that is the problem of company but it also has to face a
lot of involvement from the government officials. From the selection of its
price for the products to the appointment of the officials in the company,
PSO has to look towards the government (Rana, 2013). These all
decisions of the company are taken in the parliament house of the
country thus it has forced the company officials to impose their power
and authority over the company. This lack of authority delegation to the
higher management of the company is the reason that PSO had to face
the departure of seven appointed CEOs of company during the period of
ten years (2005-15) (Hassan, 2016). This high rotation of officials at the
senior position has seriously hit the company in its process to design
and implement the strategies that resulted in the loss of market share
and thus the revenue to the other OMCs. Recently the new appointed
CEO Mr. Sheikh Imran by the government at PSO may result no impact
on the company performance as his appointment was not supported by
the consensus of the directors in the company board also Mr. Sheikh has
to face a communication barriers to other directors as he has not been

allocated proper individual in his lower hierarchy (Hassan, 2016).

Not only the appointment of the senior officials had been carried out by
the government but the company has also to face the lot of criticism and
legal action against its officials on the various issues. Due to lack of
empowerment, no clear hierarchy lines and high level of government
involvement has resulted in the serious energy crisis in the country
during the 2015 and instead of looking for the reasons of this the
government simply see the solution of the problem in dismantling the
board of the company (Kiani, 2015).
The next problem faced by the PSO is the high involvement of the
corruption in the officials of the company. Corruption is not only the
problem of the PSO but a major issue at all the state run organizations.
Currently an official of PSO has been detained by a law enforcement
agency of the country on the basis that he had taken PKR 6 million as
bribe (The News , 2015). Corruption not only involves the kickbacks for
the officials but also the wrong use of their power to gain an unjust
benefit. This element has seriously impacted the performance of the
state run organizations like WASA, PIA, NDFC, PTA, steel mill, and PSO
etc. (Javaid, 2010).
Shell Pakistan Governance
Shell Pakistan has maintained board of directors that are most
prominent and capable individuals to discharge duties of shareholders
and other stakeholders of company. Unlike the case with PSO where the
top management is selected by the government, the professionals are
hired on the basis of their skills and long term professional careers in
Shell Pakistan. This is the reason that the company is flourishing and
continuously expanding its operations in Pakistan ranging from individual
customers to the serving the aircrafts (Sindh Government, 2016). The
Shell Pakistan has not established centralized system like in PSO where
it prefers to delegate its power and authority to its distributers to serve
the customers at the best level. It acknowledges the importance and
participation of its local distributors at the most prominent level to
encourage its associates to work and think out of the box to paint a
better image of the company to its customers. On one side when the
national petroleum company of the country is losing its market share and
the petrol stations to the other OMCs, the Shell has continued to expand
its services for its customers (The News , 2015b).

Human Capital
PSO had invested heavily in the development of the skills and the
technical abilities of its current and future workforce by launching the
different training programs within the company and many internship
initiatives all across the Pakistan (PSO, 2016). This has resulted a better
financial results for the PSO (Bhutta, 2014) and makes it possible for
them to invest in the different social welfare programs for its employees
and society (Fukukawa, 2014).
On the basis of reviews by the employees of PSO, they have no fear to
lose their jobs and have a better learning environment thereon.
According to independent employee reviews at Indeed, there is 4.3
rating out of 5 regarding work life balance, compensation and rewards,
job security, management style and organizational culture (Indeed.com,
2016). On the other side, employees at Glasdoor.com (that has a little bit
credible rating) have made a bit poor rating with 3.9 score out of 5
regarding best place to work on (Glassdoor Inc., 2016).
However, issues are unnecessary bureaucratic approach that work on
the principle to please the boss despite caring customers. It has
undermined organizational culture of state owned company that directly
impact on morale of employees there (Kalia, 2011). However, employee
recruitment in state owned companies including PSO is not made on
merit based but for political benefits, which results in wastage of
organizational resources and spoiling organizational culture as well
(Dawn, 2013). PSO needs to learn diversity management from Shell
Pakistan as company has implemented equal employment opportunity
practices in its workplace (Shell Pakistan , 2016d).
Stakeholder Capital
Due to lack of performance, PSO like government companies require a
heavy amount of assistance from the government every now that
seriously hit the budget calculations of the government. This situation
has compelled government to take loans from the international financers
and then to repay those loans the government has to increase the prices
of basic commodities in the country that bring the new wave of inflation
for the masses in the country. In the end the people of Pakistan has to
pay out of their pockets for the in efficiencies of these companies
(Javaid, 2010). It implies that there is widespread problem of governance
among PSOs organizational culture and structure, which will not allow
consistency of corporate social responsibility policies of organization.

On the contrary, current year was a nightmare for PSO as the company
had to face a major decline of 23% in its revenue due to decline in the
prices of oil products in local and international market. Company has to
bear some serious loss in its inventory that it had maintained in the
anticipation of higer selling prices but things went other way around. So
in the end the company has faced 68% of decline in its profit and also
has to suffer major decline in its cash reserves that fell down to negative
PRK 39.6 billion in the year. But even after negative cash flow the
company has still contributed more than PKR 167 million to the different
donations (Tribune, 2015a). It means that company could not add value
to the money of shareholders in current year where underlying reasons
seem to be bad governance due to high political interference in company
decision making and pressure of circular debts. On the other side, Shell
pakistan is performing relatively better than PSO due to better
operations management and governance (Wishstocks, 2015).
Environment
Companred to the past, the current petroleum industry of the country is
more environmental concerned. They are more concious on the impact
of their operations on environment and had tried their best to reduce any
of their negative impact. Also the implication of the new regulations by
the government in its Pakistan Environmental Protection Act (1997), they
have defined the new, more efficient and user friendly practices to follow,
for the companies either working in the upstream or down stream of this
sector. The only issues is now the honest efforts required from the
government and its officals to implement these regulations, to have
desired results (PPEPCA, 2014).
Pakistan has weak laws to curb pollution in oil and gas industry where
large companies need voluntary initiatives to overcome carbon
emissions (Sanchez Triana, et al., 2014). It is important component of
CSR that organizations need to account for ecological footprint
throughout their operations. PSO is operating in environmentally
sensitive industry so it has to report carbon footprint produced by its
operations but there is not such evidence found. PSO has collaborated
with LEAD Organization to promote green environment in offices five
years ago in order to respond against green global warming
consequences (Amin, 2010). It seems that PSO could not continue its
mission of reporting carbon footprint due to its liquidity issues so
company has to align triple bottom line (people, planet and profit) with its
strategic objectives as profitability objectives can be achieved with

proper adherence to social responsibility (Babalola & Abiodun, 2012).

Supply Chain Sustainability
At present the supply chain of the petroleum companies among PSO
has been under serious pressure to meet the energy demand of the
country by maintaining enough inventory level (Lead Pakistan, 2015).
This policy to maintain the stock had seriously impacted the
stakeholders in the supply chain sector when the prices had fallen in
international market. Also the fluctuating foreign currency rates is point of
concern for these companies along with some operational issues
(Yazdani, 2016). However, fall in oil prices is regarded as positive
indicator for PSO as its import bills will be reduced along with improved
situation of balance of payment (Shahjehan, 2014).
On the other side, PSO undertook environmental sustainability initiative
about ten years ago in collaboration with Lead Pakistan where
subsequent evidence of progress in bio-diesel initiative could not be
found (Lead Pakistan, 2005). PSO has demonstrated people health
security and environmental safety to be part of its mission statement
where company seems to be inconsistent in its efforts as media sources
could not be found to pursue the mission of PSO.
Carrolls CSR Pyramid at PSO
In the developing economies like Pakistan, now the organizations in
public and private sector have to fulfil the role to improve their societies
to improve their own image among its masses. (RAY, 2013).
Philanthropic
PSO is pursuing its mission under its cause of social development,
health care and educational purposes (Tribune, 2015b). PSO is leading
cash donor in Pakistan where it has donated about RKR 7.5 million for
the cause of cancer treatment to construct hospital. This step of PSO is
appreciable as cancer treatment is Pakistan is still expensive where
objective of PSO is to enable subsidized patient treatment. Likewise,
PSO empowered free service of ambulance to Chhipa welfare where it is
delivering free surgical aid to Karachi civil hospital (Fukukawa, 2014).
PSO has targeted following Universities like NED, UET, LUMS and IBA
to yield its educational objectives whereby company has awarded
students of these universities with scholarships or cash awards (KAZMI,
2012). PSO has accomplished community development project along
with educational cause by constructing 2 schools at earthquake

victimized area by empowering Heritage foundation. Company is

collaborating with another NGO the Citizen Foundation in order to build 5
schools (Moeen, 2014). It seems that PSO has evaluated the need of
victimized Manshera people while choosing its community building
project where it has catered the loyalty of deprived people.
The right choice of community building project is most important as
organization has to deploy its precious resources for the sake of CSR.
Organizations adopt differentiation CSR strategy to sustain in
competitive world where unique community building project can
differentiate organizations from competitors. It means that CSR
campaign is source of competitive advantage for organizations so PSO
has to align its campaign with its mission and strategy (Carroll &
Shabana, 2010). Likewise, PSO can retain its customers for long term by
maintaining its loyalty where product quality management is important
component of CSR (Mandhachitara & Poolthong, 2011).
PSO also has followed the path of Shell Pakistan while fulfilling the
community supporting project of road safety where it installed traffic
signals and direction signs etc. As part of public awareness campaign,
PSO has launched energy conservation campaign while educating
people to combat with energy crisis.
Ethical
PSO is accomplishing its obligations of social welfare by engaging in
community building, education, healthcare platform along donations to
charitable institutions (AsiaNet, 2011). However, PSO is not meeting
world class standards of oil and gas companies like Chevron. Chevron
has performed adequate investigation in Nigeria while scrutinizing
community needs to build public confidence, social capital development,
local capacity building as well as stimulating economic growth of country
(Alabi & Ntukekpo, 2012). It implies that haphazard social responsibility
is not effective but community development may be undertaken by
adequate investigation of local community needs in order to reform
societys conditions.
PSO has predominant challenge to fight with power crisis challenges of
Pakistan where government has owed billions of dollars to PSO (Dawn,
2015). PSO is experiencing circular debt problem where it cannot focus
on its social responsibility campaigns after getting rid of financial
stringency.

Legal
Security and exchange commission of Pakistan (SECP) has issued
general order in 2009 for all public companies to disclose their corporate
social responsibility activities (Ahmad, et al., 2015). Such voluntary
disclosures may accompany annual accounts and financial reporting to
shareholders. Public companies like PSO are enjoying the benefit of
weak laws where company does not publish sustainability report so
there are no voluntary disclosures of its agreement. PSO has just
reported the CSR activities at its website where there is lack of
independent social auditing. In this way, PSO cannot recognize its
presence among multinational organizations without standardizing its
social responsibility that should be cause oriented after recognizing the
needs of community where it is operating (Greiling, et al., 2015). PSO
has just made few pages at its website to report its CSR activities where
it need to publish independent sustainability report on regular basis like
Shell Petroleum (Amran & Haniff, 2011).
On the contrary, PSO has violated legal procedure for employee
recruitment as there is name of PSO in the case of Dr Asim who is guilty
of various criminal offences (Dunya News, 2015). Dr Asim imposed his
political dominance to recruit employees at PSO so company has strong
influence of such political personalities. Likewise, FIA (federal
intelligence agency) has arrested senior manager of PSO due to
corruption charges where he incurred significant loss to the company
(brecorder.com , 2015b). There is weak transparency and accountability
in organization that has brought about the culture of corruption due to
excessive political influence.
Economic
Despite of unfavourable economic conditions in the country due to
security situations and devalued currency, PSO still had managed a
better 2013 on the back of the better other income of the company that
was aroused due to investment payment of PKR 48.12 billion to the
company on Pakistan Investment Bonds (PIBs) and also received
different payments from other private business like independent power
producers (IPPs) in this year. So the company had a better 2013 in term
of net income and strong cash reserves of PKR 3.5 billion at the end. So
these high cash reserves had enabled the company to make a
significant contribution of around PKR 168 million for donation and
charitable cause (Mehdi, 2013).

The next year 2014 was another fabulous one for the company when it
enjoyed a record 73% rise in its profits. During this period the revenue of
the company was almost same as in previous year with a little rise but
the one-time gain on the foreign receipts of the company and the gain on
those receipts due to appreciation of rupee against dollar had provided
the company a remarkable gain. So due to this gain, the company had
enough cash reserves of PKR 9.1 billion to donate PKR 21.8 million in
2014 (Tribune, 2014d).
Figure 1 below has demonstrated positive relation with donations and
earning of organization where current year performance is ruined due to
other factors.
Chart 1
Donations to Earnings Relationship
1,000,000,000
100,000,000
10,000,000
1,000,000

10.00

218,148,135

2.42

12,637,779

6,936,364

167,696

100,000
Donations (Rs.'000)
10,000

1.00

99,991
Earnings (Rs.'000)

19,686

Donation (%)
0.16

1,000

0.10

100

0.05

10
1

2015

2014

2013

0.01

Source: (PSO, 2015) (PSO, 2014) (PSO, 2013)

Corporate Social Responsibilities of Shell Pakistan (SPL)

SPL has fully recognized its corporate social responsibilities (CSRs) and
has addressed them as per the expectations of the society. The
company is making its continuous efforts to protect the environment from
the pollution by educating the drivers. It has also shown its interest to
educate the student class on driving safely along with leadership training
by conducting sessions at LUMS University (LUMS, 2016).
Shell is also protective for the younger children and educates them how
to cross the roads safely and help the others to have a positive impact of
it (Tribune, 2015c). However, accident rate is too high in Sindh where

every child is died in four minutes.

The other prominent contribution of the company is its work in the Goth
Noor Muhammad where the company had done a significant amount of
construction and educational work (Tribune, 2011e). This area was once
the slums of Karachi city where the individuals were forced to pick out of
trash for their earnings but Shell Pakistan had done an unmatchable job
and provided the better living, education and sanitation facilities.
Comparison of PSO and SPL
Table 1
Carroll
Pyramid

Philanthro
pic

Pakistan State Oil (PSO)

Shell Pakistan Limited

(SPL)

Help and finance the NGOs in

the country working for the
betterment of education,
health and communal services
(The Nation, 2012).

Helped the people of

Goth Noor Muhammad to
improve their living
standards (Tribune,
2011e).

One of the major cash donors

of the Pakistan (The News ,
2015c).

Creating awareness in
the children about the
road safety (Tribune,
2015c).

Accused of paying less to

employees (Hussain, 2007).

Although, Shell does not

pay higher than industry
average but
comparatively it pays
better salaries to its
employees (Alam, 2011).

Not following the ethical

principals in its conduct of
business operations (Pakistan
Today, 2013).

Better return to its

associate companies and
distributors (Shell,
2016b).

Ethical

Legal

Shell Pakistan allows

Gender discrimination as only
women empowerment at
one female in the senior board
its executive positions
of the company (PSO, 2015).
(Faryal, 2015).
Legal issues in disposing the
industrial waste in the sea

Fulfilling all the legal

needs of the law

Economic

(Saeed, 2013).

enforcement agencies in
the country.

The largest oil company of the

country.

Helping the drivers to

understand the
importance of
economical use of fuel
(Tribune, 2015c).

Losing its market share to the

other Oil Marketing
Companies (OMCs) (Kiani,
2015).

Increasing its number of

stations in Pakistan to
serve more customers as
shown in Figure 1.

High return to its shareholders

as shown in Table 1.

Suffered loss in recent

financial period due to
sharp decline in oil
products but still pay
substantial return to its
shareholders (Shell,
2015).

Table 2 (PSO, 2015) (PSO, 2014) (PSO, 2013)

Chart 2 (Shell, 2016c)

Conclusion
Corporate social responsibility is most important subject for PSO as it is
operating in oil and gas industry so it cannot sustain without
demonstrating its cause of existence. The mission and vision of PSO is
impressive that considers current and future energy needs of people
where it intends to produce energy through innovative means. PSO has
publicized its differentiation approach while handling to competitors and
meeting energy demands of country.
It is evident that PSO charity functions are no longer enough to
discharge its corporate social responsibility. Pakistan State Oil is cash
strapped organization whereby creating balance between triple bottom
line parameters is challenging for organization. Similarly, PSO has faced
circular debt problem so it cannot maintain its social responsibility
campaigns unless it gets rid of its financial stringency.
In its mission statement it has focused to provide a better, honest and
friendly environment that seems misleading by reviewing its governance
position. Pakistan State Oil has to support responsible investment
resourcefulness that can revive its supply while following sustainability
standards that should be of best in class. PSO ought to maintain
adequate safety stock to combat with current and future energy needs of
country while correcting supply levels.

There are significant governance flaws like weak transparency and

accountability in organization that has brought about corruption culture
along with political dominance of politicians. Company has not following
the path of mission statement as company officials are charged of
corrupt activities that caused loss to the company. It is recommended
that company needs to achieve autonomous governance in order to
succeed in accomplishing its vision and mission statement. Concluding
the above discussion, stakeholders of company are expecting much
more from company where PSO is not satisfying the needs of its
stakeholders due to weak corporate governance and political influence.
These two factors have restricting PSO from demonstrating its position
like Shell Petroleum.
Recommendations
PSO should make sure legal compliance while introducing
corruption free environment along with transparency and
accountability of organizational members.
PSO has to work aggressively to lay off incompetent, dishonest
and corrupt officials from its workforce where it should not matter
the designation they are working in the company. This will not only
give the company a chance to appoint capable individuals on
those posts but will also help to improve its image among its
customers.
In addition to legal compliance, PSO should give voluntary
disclosure of its CSR activities that may include carbon footprint
produced by its activities that is compulsory for oil and gas
company.
In particular, PSO should abolish the culture of red taped officials
and rigid bureaucracy while introducing flexible teamwork
organizational structure.
Government should reduce its involvement in the PSO gradually
and may give the company and its officials to work and compete
independently with other market players in the free market.
Government may cause to improve liquidity issues of PSO while
minimizing excessive political influence in the company
Along with financial assistance to the different NGOs in the
country, the PSO can also provide some important skills to carry
out different jobs while following the path of Shell at Goth
Muhammad.
Skills development and employment creation are effective

alternatives of cash donations where PSO can bring changing in

society more positively.
In Pakistan like country there is greater need of skills development
so PSO can run employment campaign through its senior
workforce.
There is graver need of retention of official on the part of senior
board members so they may hold their office for longer term to
maintain consistency in the board policies.