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Copyright © 2003 by South-Western, a division of Thomson Learning

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Chapter Two

Stakeholder And Issues Management

Approaches


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Chapter Topics

1. Why use a stakeholder management approach for business ethics?

2. Stakeholder management approach defined

3. How to execute a stakeholder analysis4. Stakeholder approach and ethical

reasoning5. Moral responsibilities of functional

area professionals6. Three issues management approaches7. Two crisis management approaches


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Why Use A Stakeholder Management Approach For

Business Ethics? The stakeholder approach is a response to the

growth and complexity of understanding and study of the modern corporation and its influence on the environment.

The ethical dimension of this approach is based on the view that:

Profit maximization is constrained by justice Regard for individual rights should be extended to all

constituencies that have a stake in the affairs of a business

Organizations are not simply or only economic in nature but can and do act in socially responsible ways, not only because it is the right thing to do, but also to ensure their legitimacy

Examine the Microsoft case


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Stakeholder Management Approach

Defined The stakeholder approach provides a

framework that enables users to map and ideally, manage the corporation’s relationships, both present and potential, with groups to reach win-win collaborative outcomes.

It does not have to result from a crisis or controversial situation.

It can be used as a planning method to anticipate and facilitate business decisions, events, and policy outcomes.

Business units, teams, and groups can use this approach.


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Stakeholder Management Approach

Defined Stakeholder: any individual or group who

can affect or is affected by the actions, decisions, policies, practices, or goals of the organization.

Primary stakeholders of a firm: owners, customers, employees, and suppliers.

Secondary stakeholders: all other interested groups such as the media, consumers, lobbyists, courts, governments, competitors, the public, and society.

Stakes: any interest, share, or claim that a group or individual has in the outcome of a corporation’s policies, procedures, or action toward others.


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How To Execute A Stakeholder Analysis

The stakeholder approach is a pragmatic way of identifying and understanding multiple, often competing, political, social, legal, economic, and moral claims of many constituencies.

The stakeholder analysis is a series of steps aimed at the following tasks:

Mapping stakeholder relationships Mapping stakeholder coalitions Assessing the nature of each stakeholder’s

interest Assessing the nature of each stakeholder’s power Constructing a matrix of stakeholder moral

responsibilities Developing specific strategies and tactics Monitoring shifting coalitions


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Stakeholder Approach And Ethical Reasoning The stakeholder analysis is an analytical

method where no prescribed ethical principles or responsibility rules are built-in.

Ethical reasoning in the stakeholder analysis means asking:

What is equitable, just, fair, and good for those who affect and are affected by business decisions?

Who are the weaker stakeholders in terms of power and influence?

Who can, who will, and who should help weaker stakeholders make their voices heard and encourage their participation in the decision process and outcomes?


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Moral Responsibilities Of Functional Area Professionals

One goal of a stakeholder analysis is to encourage and prepare organizational managers to articulate their own moral responsibility, as well as the responsibilities of the company and their profession, toward their different constituencies.

Stakeholder analysis focuses the enterprise’s attention and moral decision-making process on external events.

This approach applies internally, especially to individual managers in and across traditional function areas.


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Moral Responsibilities Of Functional Area Professionals

Traditional functional and expert areas include:

Marketing Research and development (R& D) Manufacturing Public relations Human resource management (HRM)


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Three Issues Management Approaches

First Approach: 6-Step Issue Management Process

Most straightforward More appropriate for companies or

groups trying to understand, manage, and control their internal environments

Involves the following steps: Environmental scanning and issues

identification Issues analysis Issues ranking and prioritizing Issues resolution strategizing Issues response and implementation Issues evaluation and monitoring


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Second Approach: 7-Phase Issue Development Process

Issues are believed to follow a developmental life cycle

Life-cycle stages suggested for tracking an issue:

A felt need arises Media coverage is developed Interest group development gains momentum Policies are adopted by leading political

jurisdictions The federal government gives attention to the

issue Issues and policies evolve into legislation and

regulation Issues and policies enter litigation


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Third Approach: 4-Stage Issue Life Cycle

Thomas Marx observed that issues evolve from social expectations to social control through the following steps:

Social expectations Political issues Legislation Social control


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Two Crisis Management Approaches

First Approach: Precrisis Through Resolution

According to this model, a crisis consists of four stages:

Prodromal (precrisis) Warning stage

Acute Damage has been done

Chronic Clean-up phase

Resolved The crisis management goal


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Second Approach: Reaction Through Accommodation

Five phases of corporate social response to crises related to unsafe products, or product crisis management include:

Reaction A crisis has occurred

Defense The company is overwhelmed by public attention

Insight Most agonizing time

Accommodation Addressing public pressure and anxiety

Agency Company attempts to understand the causes


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Suggestions that corporations can follow to respond more effectively to crises include:

Face the problem Take your lumps Recognize that there is no such thing as

a secret or private crisis Stage war games Use the firm’s philosophy, motto, or

mission statement Use the firm’s closeness to customers

and end users for early feedback


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Issues and crisis management methods and preventive techniques are effective in corporations only if:

Top management is supportive and participates

Involvement is cross-departmental The issues management unit fits

with the firm’s culture Output, instead of process, is the

focus

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