The complexity of the ecosystem in which companies operate requires a new relational agenda, whose objective will be to facilitate the most favourable environment for the fulfilment of their business objectives.

CorporaTe DiplomaCy:

Rafael Cabarcos and Carlos S. Ponz

A new exeCutive MAnAgeMent tool foR geneRAting vAlue by MeAnS of RelAtionAl CAPitAl

Contents

1. Acknowledgements 4

2. Research Methodology 6

3. Introduction: The Change of Role in the Current Organization 8

4. A New Relational Reality 10

5. Corporate Diplomacy: Key Principles 12

6. The Legitimization of the Organization as an Influential Player 14

7. New Mechanisms for Relating to the Environment in which Companies Operate 18

8. A Cross-functional Approach 24

9. A New Risk Panorama 30

10. Traditional Approach to Business Diplomacy vs. New Approaches 34

11. Skills and Competences of the Corporate Diplomat 42

12. The Major Challenges for Corporate Diplomacy 46

13. Conclusions 48

14. Bibliography and Sources Used 50

32

Dip

lom

ac

ia c

or

po

ra

tiv

a

1.acknowledgements

i

The authors would like to express their thanks for the cooperation of all the

professionals who have made this study possible. in particular, we would

like to thank Javier Garilleti from the ey Foundation and Francisco Navarro from the ie Global Corporation Center because, without their

vision, commitment and endeavour, this work could not have gone ahead.

We would like to thank Valentina Moreno, Rafael Mira and Leticia Soberón, for their constant support and excellent contributions, and the

enthusiastic participants in the Collaboratorium platform: Ángel Alloza, Luis Abril, Miguel Mira, Goyo Panadero, María Teresa Aranzábal, Eugenio Martínez, Antonio Camuñas, Felipe González Abad, Giuseppe Tringali and Gustavo de Aristegui.

in the field work, we cannot forget Adolfo Aguilar, Belén Bueno, Javier Cantera, Elena Dinesen, Plácido Fajardo, Ramón Gascón, Ignacio Gasset, Iñigo Luis, Jesús Marrodan, Luis Truchado and Miguel Angel Zuil.

and finally, our thanks for the constantly brilliant input from Jorge Cachinero, Eduardo Diez Hochleitner, Manuel Egea, Fernando Fernandez, Rafael Gómez Jordana, María Lorenzo, Juan Luis Manfredi, Guillermo Muñoz, Carlos Olave, Juan Prieto and Ignacio Santillana.

54

Dip

lom

ac

ia c

or

po

ra

tiv

a

TECHNICAL DATA SHEET

The Global Corporation Center, in partnership with the Company institute

and the ey Foundation, decided to conduct a study on the emergence of

Corporate Diplomacy (CD) in the business world. This is a new discipline

which, over the last decade, has attracted the attention of the academic

world and has gradually made its way into the business world, with the aim

of meeting the needs of its increasingly complex relational framework. in

order to do so, it set out to gather the opinions of executives and experts from

different disciplines and to describe the form it takes when incorporated by

various organizations. The primary aim was, therefore, to ascertain the current

status of this discipline in the business field and to analyse its relevance. in

addition, the purpose was to identify the areas involved in the management

of this issue, as well as the competences required for performing it properly.

Upon the basis of this information, this report’s research team was able to

draw some useful conclusions.

in order to conduct this study, four field work paths were used:

Collaboratorium, the collaborative and knowledge-enhancement platform,

designed by the DontKnow team, questionnaires, interviews and workshops

with experts.

The work on the collaborative platform was envisaged by means of challenges

to experts focused on specifying content, fields, fitting into the organization

and the organization’s functions and competences.

The questionnaire which was conducted consisted of the compilation

of a set of quantifiable indicators with regard to the relevance Corporate

Diplomacy has to the professionals interviewed in their organizations, as well

as its importance within current business strategies. The data were collected

between December 2015 and may 2016.

The quantifiable indicators were grouped together under six headings,

each of which included a set of options with which the participants had to

indicate the extent to which they agreed or disagreed. as a general rule,

satisfaction was measured, as appropriate, on a scale from 1 (totally disagree/

not important at all) to 5 (totally agree/highly important) in relation to the

statement contained in the item.

2. research methodology QueStionnAiRe: “CoRPoRAte DiPloMACy – new oRgAniZAtionAl SKillS?”

The questions referred to:

• The incorporation of Corporate Diplomacy into best practice strategies

• The real impact of CD on an organization’s financial statement

• The company departments which are related to CD

• The concepts to which CD is most directly related

• The positioning of the organization with regard to the most critical issues

• The main objective of a lobbying strategy in an organization

The questionnaires were distributed in two ways: by email and by hand to the participants in the various workshops held in madrid. each of the attendees

invited took part by filling in a document, with their confidentiality guaranteed at all times. 83 professionals from different organizations with the following

profiles took part: Chairmen, managing Directors, Human resource managers, Business managers, Communication managers and Corporate Social

responsibility policy managers.

76

Dip

lom

ac

ia c

or

po

ra

tiv

a

3. Nowadays, global organizations have to compete in a new and highly-volatile

environment, full of fluctuating elements, in which uncertainty has become the norm.

The interconnection between the elements of the system acts as an accelerator of

events and impacts, adding rapid conFiguretions of opportunities and risks to the

complex scenario, which require real-time reactions with the appropriate capacity

for analysis.

This is a state of affairs full of risks of very different kinds which are difficult to manage,

with disruption in terms of both technological proposals and social trends, which pose

a demanding challenge for companies and require flexible organizations with business

models which can rapidly adapt to change. regardless of the industry country or the

markets in which a company operates, its decision-making framework is affected by

economic, political and social factors on a worldwide scale, to which it has to react. The

severe economic crisis is causing a rapid reshuffle of political priorities in response to

the complex imbalances it is generating, especially in terms of geographical mobility,

impact on employment and social inequalities.

This new paradigm can be explained by means of four crucial factors, which have had

a significant impact on the current reality, in which the speed of change is challenging

our ability to adapt to it:

the ChAnge of Role in the CuRRent oRgAniZAtion

introduction

• TheTendencyTowardshyper-Transparency.

The integration of technology into everyday life has increased the public’s submission to it, with the gradual loss of people’s privacy along the way in favour of an unlimited social universe. Within this context of the ultra-fast digitization of the planet, in which the possibilities of social manipulation become simpler, companies have to open their doors wide so that the air can circulate. The options of silence or absence in the face of the public’s demands increase suspicion and lead to adverse sensations in public perception.

• IncreaseInTheInfluenceofTheregulaTor.

The level of social pressure which has arisen in the 21st century requires the State to play a more active role in the supervision and control of business activity. There is a tendency towards hyper-regulation, arising from social mistrust of the system and political processes distinguished by weak and fragmented leaderships and the short-term approach of their actions. At the same time, however, this phenomenon contrasts with the growing need for the public sector to increase cooperation with the second and third sectors.

• TheacceleraTIonofglobalIzaTIon.

The ratification of the Trans-Pacific Partnership (TPP) and the progress in the negotiations concerning the European TTIP will not only generate business opportunities and exchanges at all levels, but will also act as catalysts of companies’ internationalization dynamics. Relational capital management will become an essential asset of the organization.

• TheTechnologIcalTrIgger.

The disruptive developments of information systems have a substantial influence on this global framework by increasing the exposure of organizations to public opinion. The public has progressively removed the barriers which, until recently, separated it from other stakeholders. Now, hyperconnectivity is promoting a profound change of habits, reflected in the demand for the greater social involvement of organizations and the immediacy of their response, among other things.

98

Dip

lom

ac

ia c

or

po

ra

tiv

a

4. a new relational reality

in this unprecedented global economic system, the forum for dialogue has expanded

for organizations, and it is no longer enough to include the traditional stakeholders in the

conversation – it is now essential to include all the groups, organizations and people who may

be in some way affected by business decisions, and who ultimately have to give their approval

to the operations.

Corporate Diplomacy addresses this new relational reality, seeking not only to contribute to

the defence of the reputation, credibility and good image of the organization, but also, to

continuously construct and strengthen fluent and stable communication channels with all the

social agents, in the interests of proactivity in the transmission of content and the need to find

common ground favouring all the parties involved.

it is a tool designed for the generation of value by means of the management of relational

capital, by which we mean a company’s tangible and intangible resources that represent the

value of its relationship with its environment, and are capable of forming ties with stakeholders

ranging from customers, employees, regulators, suppliers and competitors, to social agents, the

media, public bodies, shareholders and other players in society at large.

Therefore, Corporate Diplomacy is becoming a

management tool of an inter-disciplinary nature

incorporating global objectives and analyses

with regard to companies’ positioning, with the

input offered by their various business units. it is

a task which is far from simple, bearing in mind

that the organization’s current-day Corporate

Diplomacy agenda is spread over multiple foci,

without managing to provide an integrated

solution.

Nowadays, the 20th-century company model

which exclusively addressed an economic-

financial reality has become outdated and

is no longer sustainable in the long term.

organizations, as prominent social agents, are

extending their responsibility to what Cachinero,

manfredi and Bermejo have cheerfully called the

“quintuple financial statement” 1, in order to

forge their social commitment.

This dialogue, however, must reconcile the

autonomy of the operational units with

harmonization within the global corporate

discourse. all the conversations must be perfectly

interwoven within the totality of business actions.

This multiplicity of actions, agents and scenarios

suggests, at the very least, a revision of the

organization’s internal mechanisms for relating

with the environment and emphasizes the

relevance of Corporate Diplomacy. paradoxically,

this discipline, which has not yet received sufficient

attention from either the business or academic

world, is recovering its protagonism due to its

potential to offer high-level management of a

global and integrated relational agenda.

1 T h e e m e r g e n c e o f t h e quintuple financial statement is related to the transformation of the business model of o rganizat ions , which are progressively incorporating a multi-scale model into their management systems, which moves from a first economic-f inancial dimension, on to a second, which answers the needs of governance, ethics and leadership; a third, incorporating responsibility for the impact on the environment; a fourth: a financial statement related to people management and talent development and, finally, a fifth: a financial statement connected to social interdependence and the contribution which, like any other citizen, companies make to the society in which they conduct their activity. Cachinero, J., Bermejo, M. and Manfredi, J.L. Leadership in the Society of Change: Corporate Diplomacy, Reputation and Business Schools (Developing Ideas , Llorente & Cuenca, Madrid, 2013),

1110

Dip

lom

ac

ia c

or

po

ra

tiv

a

Corporate Diplomacy was conceived as a result of the process of worldwide

economic globalization, which has led to more and more companies

fragmenting their production processes, and simultaneously performing

varied activities and tasks in different countries which make up their global

value chain. The progressive reduction of tariff and border constraints in

the international arena has led to numerous and rapid changes which,

together with other effects (greater competition, new, mainly asian, players

and technological breakthroughs, to mention just a few) has forced

multinational companies to develop new global-scale relational strategies,

such as becoming the direct interlocutors with various regulators and public

administrations, for which reason they have established ambitious plans in

order to maximize profits from their investments on behalf of and in defence

of their own interests.

as mentioned above, Corporate Diplomacy addresses this new relational

reality of a company, constantly building and enhancing links and partnerships

with the various stakeholders, in the interest of transparency, proactivity in

the transmission of content and the need to continuously find points of

convergence.

The increasingly necessary and intense cooperation between the public and

private sectors is generating a new dynamic of understanding between them

while demanding a more fluent framework of collaboration and mutual

support. Business diplomacy is once again playing an important role, relating

private interests with action on behalf of the common good.

on an internal level, the person who occupies the position of corporate

diplomat should not base their strategy of action (nor, therefore, their

messages to stakeholders) on strictly financial parameters, but must also

bear in mind other matters of a political, commercial or social nature if they

want to be successful in achieving their strategic objectives. all the above

unfolds within a global context, in which each region/country/environment

has different regulations, with clearly different concerns and legislative

priorities on the part of the regulator.

5.Corporate Diplomacy: Key principles

The capitalization of external relations and knowledge of the idiosyncrasies of every market are key elements for achieving success.

With these elements on the table, we can identify the following key points with regard to the reasons for and purposes of Corporate Diplomacy in today’s world:

1. CollAboRAtive intelligenCe

The complexity of today’s world makes

it essential to develop associative and

collaborative policies to ensure the survival

of any entity. The visibility of a brand or the

possession of irreproachable reputational

values is no longer sufficient; it is now necessary

to forge partnerships, establish networks and

enter into collaboration with the different

stakeholders if goals are to be met.

2. effeCtive MAnAgeMent of CoRPoRAte ReSPonSibility

Today, more than ever, the social aspect of

a company is present in public opinion. its

image, its ideological positioning on sensitive

issues, the rights of its workers and its code of

conduct are critical factors in the generation

of financial value and trust in the eyes of the

different stakeholders. public authorities are

looking more and more closely at companies’

CSr policies, making them very costly in

terms of the constant efforts to reap positive

returns for a company and very liable to

undergo negative impacts in the face of the

different imponderable factors of day-to-day

management. Corporate Diplomacy must

be able to faithfully convey its objectives and

achievements, which will very often constitute

the best letter of recommendation to the

outside world for an organization.

3. CReDibility AnD PoSitioning

Being present in today’s world means

actively working on daily positioning and

gaining credibility with all those concerned.

a company’s reputation becomes one of its

main intangible assets. Silence on different

topics or absence from relevant forums are

interpreted as negative elements and content

(narrative, transparency, responsibility, ethics,

commitment) is as important as the channels

used. Having this constant presence on the

different levels of the scale facilitates the

establishment of positive dialogue, as well

as the conducting of fruitful negotiations on

essential elements of company strategy.

4. PRevention AnD AntiCiPAtion

The purpose of Corporate Diplomacy is to

overcome obstacles in order to facilitate

companies’ business activities. Therefore,

the longer the period during which that

facilitating occurs, the more effective it will

be. its main tasks include the development

of business intelligence (information sources,

partnerships, competition and trend analysis),

analysis of the potential risks in the prevailing

climate (geopolitical risks) and the derivatives

of regulatory risk.

1312

Dip

lom

ac

ia c

or

po

ra

tiv

a

6. in order to learn more about the discipline, an initial compilation

of the definitions of CD given to date by the academic and

business consulting worlds was conducted. once those which

were regarded as most relevant for the purpose of the study were

filtered, an initial analysis was conducted, so as to highlight key

concepts. Subsequently, these concepts and content were matched

to the areas of the organization whose tasks directly included the

management of these responsibilities.

in total, 19 definitions of the term in the academic and professional

worlds were identified, conveying 30 key concepts related to 25

functional departments of a company. The terms to which these

definitions refer are represented in figure 1:

The legitimization of the organization as an influential player

Recognition as a corporate/brand agent

Relational framework

Representation of interests

Stakeholders

Influence

Corporate responsibility

Public-private convergence

Value for the shareholder/High-level business objectives

Public authorities

Business Intelligence

Responsible leadership

Negotiation

Reputation

Anticipation

Conflicts and crises

Public Relations

Perception and image

Partnerships

Political Risk

Institutional Relations

Communication

Public Opinion

Source: Internal.

Figure 1. League Table of Concepts Mentioned in the Definitions (%)

0 1 0 2 0 3 0 4 0 5 0 6 0 7 0

whAt iS MeAnt by CoRPoRAte DiPloMACy

1514

Dip

lom

ac

ia c

or

po

ra

tiv

a

The experts pointed to the strong identity component of

Corporate Diplomacy (63.2%), suggesting the need for a

company to legitimize itself as a distinctive and influential

player in the eyes of its stakeholders. in order to negotiate,

the player has to be recognized as such by their counterpart

and diplomatic ability is a significant factor.

Secondly, the definitions refer to the complex framework of

relationships (57.9%) in which organizations operate, and to

where the main field of CD action lies, representing companies’

interests (52.6%) to their stakeholders (52.6%).

The analysis of the definitions also provided an interesting

perspective which confirms the declaration made by Basque

businessman Josu Ugarte 2, referring to a company’s ability

to interact effectively with external stakeholders, especially for

the protection of investments and for business development

at C-level.

1. sTraTegy Corporate Diplomacy fis part of corporate strategy.

It is an appendix or a tool for a company whose purpose is to “execute” or “implement” corporate strategy “beyond” a company’s borders in terms of its relationship with stakeholders.

Companies in this complex, worldwide framework of relations (I) develop a policy of strategic partnerships that promote collaboration in smart networks, thereby developing models of collective intelligence, (II) strengthen their capacities on a global scale based on the generation of knowledge and the acquisition and retention of outstanding talent, among other things, (III) strengthen their ability to anticipate risks, with increasingly sophisticated handling of big data and (IV) take good care of their relationships with their stakeholders.

The vast majority of experts stated that the management of the

Corporate Diplomacy agenda is the responsibility of a company’s

Senior management. in particular, it is clear that, in the Global

versus local business strategies, the figure of Country manager

also plays an important role in its management.

To sum up the analysis of all these definitions, it can be stated that Corporate Diplomacy is the instrumental development of a company’s influence strategy, with the aim of guaranteeing a favourable environment for its interests.

The selected definitions shared common elements, which can

be summarized in the following points:

1) Strategy

2) influence

3) external (and internal) stakeholders

4) Satisfying companies’ goals and interests

5) Creating value for companies

5. creaTIngValueforcompanIes Ultimately, a company’s goal is to “create value” for its

shareholders and internal stakeholders. What impact does it have on an oil company when it take years to obtain permission to drill in a certain area because local players are discussing the terms before giving us their approval? The more effective the Corporate Diplomacy is in obtaining the above permission, the more value it will generate for the company.

4. saTIsfyIngThesTakeholders’goalsandINTERESTS

If we are able to understand our stakeholders, we will be in a position to manage their goals and interests. This is the best way of obtaining their “permission” or “social licence” to operate, by means of a kind of “win-win” agreement in whic

3. exTernalandInTernalsTakeholders Corporate Diplomacy operates on the totality of

stakeholders whom Corporate Diplomacy must identify, get to know, and understand in order to plan its action. In an open system, there are as many interlocutors as there are stakeholders and it is necessary to get to know each and every one of them, in order to understand their motivations, interests and expectations.

2. Influence One of the intermediate objectives of Corporate

Diplomacy is to “gain influence”, to “create or gain space” so that companies can reach their ultimate goals. Being regarded as a valid interlocutor means being taken into account. A corporate diplomat can only manage to achieve their objectives from this position.

2 Bankinter Debate: Conversation between Josu Ugarte and José María O´Kean, 29 October 2015. http://blog.bankinter.c o m / b l o g s / b a n k i n t e r /archive/2015/ 10/29/debate-bankinter-cara-a-cara-entre-jose-maria-okean-josu-ugarte.aspx

1716

Dip

lom

ac

ia c

or

po

ra

tiv

a

Business closing NGO’s long-held lead in trust

NGOS BUSINESS MEDIA GOVERNMENT

7. Nowadays, the economy is characterized by the simultaneous impact of different factors of change which are technological,

competitive, spatial, cultural and organizational. it is a complex society that is difficult to deal with and predict, one which is

full of contradictions and uncertainties. it is an “era of intangibles”, in which the creation of knowledge-based value entails the

gathering of information, and the processing of that information is its most essential feature.

Within this context, companies act as living organisms which co-exist within an environment. in fact, they are described as

the most dynamic institutions of post-industrial society (omil, 1997)3. Their strategy is chiefly conditioned by the environment

in which they operate.

Contemporary companies adapt to the complexity of today’s world by recognizing that, in a globalized world, their attitude

cannot be exclusively self-referential, but rather needs to be relational, in other words, an open system in which it interacts

with the market and the different stakeholders, in a constant search for an exchange of proposals. in this process, recognizing

one’s position as a social agent entails acquiring a more active role.

in spite of the growing disaffection of society towards their institutions, companies and entrepreneurs still instil, in the opinion

of respondents (edelman Trust Barometer, 2016), greater trust than the State apparatus as agents of change, able to solve

some of the biggest problems faced by today’s society. in specific terms, taking into account the opinion of the public, 53%

declare that they trust companies (5 points more than in last year’s study). Taking into account a more informed public, this

percentage rises to 63%, 12 points more than that of governments, as shown in figure 2:

New mechanisms for relating to the environment in which Companies operate

3 Omil , J . ( 19 97) . Bus ine s s Management : Foundations in an Open and Dynamic Environment. Madrid. Ediciones Pirámide.

Source: Edelman Trust Barometer, 2016

Figure 2. Trust Rising. Percent trust in the four institutions of government, business, media and NGOs, 2015 vs. 2016

Informed Public

General Population

2015

2016

+4

+4

+6

+5

+6

+2

+3

+1

67 63 57 51

55 53 47 42

63 57 51 48

51 48 45 41

1918

Dip

lom

ac

ia c

or

po

ra

tiv

a

in this new domain, citizen-consumers have become an essential part of the chain, and are obliging organizations to take an active position with regard to the

issues which concern them the most, including critical and sensitive topics like the environment, human rights, business ethics and transparency, to name but

a few examples. Citizens openly express their opinion that companies should be actively involved in social debate. according to the same Trust Barometer, 8

out of 10 respondents think that Ceos should have greater social profiles and be present and take positions in the debate on social issues.

Nowadays more than ever, companies need to consider their stakeholders when it comes to making decisions and planning their operations. Not only should

those from institutional (government, state agencies) and sectoral (suppliers, competitors, distribution channels) fields and the media be highlighted. employees,

consumers and customers are acquiring new perspectives and concerns of very different natures relating to social and environmental issues, human rights,

ethics, transparency and solidarity. The expectations of these stakeholders are also conditioned by their respective environments, as illustrated in edelman’s

above-mentioned study (figure 3):

Figure 3. Societal Expectations Vary. Percent who agree each is an important issue for business to address

Source: Edelman Trust Barometer, 2016

U.S

.

Can

ad

a

Mex

ico

Bra

zil

Arg

en

tin

a

U.K

.

Ge

rman

y

Fran

ce

Ital

y

Sp

ain

Ire

lan

d

Net

he

rlan

ds

Po

lan

d

Sw

ed

en

Ru

ssia

UA

E

So

uth

Afr

ica

Turk

ey

Ind

ia

Ch

ina

Jap

an

S. K

ore

a

Ind

on

esi

a

Au

stra

lia

Sin

gap

ore

Ho

ng

Ko

ng

Mal

aysi

a

Co

lom

bia

Improving access to education and training

81 82 94 88 85 84 84 82 89 89 88 87 81 78 76 85 86 86 87 82 63 82 84 82 85 76 87 89

Improving access to food, potable water and housing

79 82 93 85 83 73 82 84 89 89 80 84 75 76 77 81 85 82 86 85 65 76 83 78 78 72 82 89

Reducing poverty 76 81 95 85 82 81 83 83 93 90 84 84 77 74 75 85 84 85 83 86 74 80 85 77 81 74 82 88

Protecting and improving the environment

80 84 94 89 82 80 86 87 88 89 84 84 76 82 80 84 87 85 87 87 76 87 81 81 82 73 83 88

Creating and maintaining a modern infrastructure 80 80 90 89 83 81 85 81 85 85 85 79 80 76 81 84 84 83 87 87 71 84 80 82 81 73 82 88

Supporting human and civil rights 83 84 93 85 81 81 84 81 88 90 84 87 82 84 70 79 83 86 84 82 64 79 82 80 79 68 80 86

Improving the access to healthcare 85 81 93 85 83 79 85 84 90 90 84 85 83 79 77 86 89 85 89 82 72 78 83 80 80 76 84 85

Addressing income inequality 79 82 91 84 78 83 83 86 88 90 87 85 79 79 71 77 85 85 82 85 76 84 79 83 81 72 82 85

Addressing climate change/ global warming

71 77 92 84 79 74 84 81 88 87 82 81 67 75 53 77 80 80 82 82 67 77 79 77 77 73 76 84

Addressing gender inequality 75 78 91 79 76 74 78 83 80 83 79 74 59 74 47 78 81 75 82 80 68 79 78 76 75 67 73 84

Developing better solutions for immigrants, refuge and migrant workers

67 66 89 80 71 62 66 55 75 78 75 71 53 64 50 77 69 77 81 78 58 66 75 67 71 58 70 81

Maintaining geo-political stability 68 69 86 83 75 69 75 71 77 79 71 71 72 64 67 79 75 77 83 81 60 72 78 74 73 69 79 79

• Internationalization and globalization of activities, but with the increasing importance of understanding

and adapting to the sensitivities of each geographical

area. according to Carol a. adams (monash University) 4,

companies of the future will do business differently because

they will understand the value of their relationships and the

resources and services provided by their natural environment.

They will be very different from today’s companies. They

will have to be more integrated into civil society and not

remain isolated and focused on the pursuit of their own

benefits. This integration will need to be both physical (in

the ecosystem) and ethical (with social values).

• Technological development and the impact of new information systems, which will increase exposure to

public opinion (social media), the need for transparency

and immediacy in response to requests from stakeholders.

Companies can no longer afford to be absent from the

various forums: this is interpreted as something negative in

the eyes of the public.

• in this regard, the developments in IT and the arrival of big data are leading to very significant changes in the internal

organization of companies, their business strategies and their

structures. Their impact is clearly visible in two milestones: 1)

the deconstruction of value chains, with the decomposition

of vertically integrated businesses as interoperability and

interconnection standards replace intermediation processes

and, 2) the polarization of economies of scale, which means

that, in certain sectors, economies of scale and experience

are losing their ability to add competitive advantages, while

this ability is intensifying in others.

• The need for companies to take positions on critical issues

which demand the attention of consumers (climate change,

labour rights, transparency, ethics, fair trade, the wage

gap, etc.), in order to establish what is known as “business

ethics”. in this regard, the public is progressively abandoning

traditional information systems (the press, radio, television)

in favour of others based on immediacy, such as online

newspapers and social media, a trend which is radically

transforming the way in which companies communicate

with society.

• Management of intangibles. Companies can no longer

find success based exclusively on traditional competitive

factors, such as product, quality, service, costs, and so on. The

true competitive opportunity will be found in their capacity

to manage intangible resources and transfer them to the

market as stand-out proposals for adding corporate value.

• The role of the State remains a core factor in this context

of complex social change. its capacity for structuring is

decisive when it comes to dictating policies to satisfy the

general interest. The sensitivity of the public, as dictated

by stakeholders, poses a constant challenge for political

authorities which, in order to soften its impact, opt to

completely regulate the markets. This phenomenon, called

hyper-regulation, is currently one of the major concerns for

entrepreneurs.

4 Adams, Carol (2014). Reinventing the Company in the Digital Age, BBVA.

Within this context, in which the speed of change has exceeded the speed of adaptation to it, we should consider a set of

fundamental changes which deeply affect company strategy:

2120

Dip

lom

ac

ia c

or

po

ra

tiv

a

• The role of the regulator as a stakeholder. public servants, in their role as watchdogs

in favour of the public in general, strongly encourage the participation of stakeholders,

thereby enhancing the cooperation of citizens and their agents in public life. This

convergence, which is the result of political pragmatism, provides exceptional opportunities

to stakeholders, who are then able to build their relationship with their environment with

more professionalism.

• Taking on the challenge of sustainability. Getting companies to take responsibility

for the impact they have, beyond their traditional areas of control. This new corporate

responsibility in the business world means both being accountable for one’s actions, and

accepting the consequences of them in the eyes of stakeholders.

•constantcompanystrategyreviewsandflexibilityindecision-making.The key is to

reconcile the daily demands of business activity with the early identification of risks and

opportunities, formulating strategic and innovative initiatives with agility and implementing

them with the required speed (Kotter, J., 1990)5. Within this new environment, the

capacity to obtain and process information takes on great importance. Companies must

guarantee an organizational structure which prevents the process of information being

converted into cultural heritage and provides the necessary mechanisms to promote open

collaborative intelligence. in order to achieve the above, a dual organizational system, in

which hierarchically structured company departments co-exist with other areas organized

online, can facilitate this flow of information.

• The open innovation proposed by professor Henry Chesbrough (2003)6 takes on its full meaning in this new collaborative

environment. in order to improve and increase their flow of information, companies must go beyond the internal limits of

their organization and open up to the market, in which cooperation with external professionals takes on a strategic role.

open innovation means breaking down the internal barrier which prevents us from opening up in order to combine internal

knowledge and external knowledge.

• Disruptive, global and independent talent. The new environment demands a new organization capable of bringing together

special talent for each business. With new work formats, companies should be able to formulate new value propositions

to a collaborator, who will bear little resemblance to traditional freelance contractors. They will be global professionals who

participate in knowledge networks, and are committed to projects and their leaders, versatile and have a great capacity for

self-teaching, with career paths which are much more difficult to predict.

• The selection of information is important within a context of information overload (a phenomenon known as infoxication).

it is essential to know how to manage sources, filter and categorize the information and, finally, process it so to can be used

in decision-making.

• Global operations. The theatre of operations of business activity is global. Financial and production flows oblige companies to

be open with regard to the location and geographical distribution of their processes in the value chain. risks of a geopolitical

nature and companies’ increasing susceptibility to new regulatory, social and trans-cultural challenges are widening the

agenda of business diplomacy.

• The strategic management of stakeholders is on the agenda of the board of directors. its increasing importance means

ever-greater precision needs to be applied to its objectives and the reporting of its activity. The good governance of a company

requires the values and ethical principles of the organization to be aligned, thus ensuring consistent actions by the company’s

representatives.

5 Kotter, J. (1990). The Leadership Factor. Madrid: Ediciones Díaz de Santos

6 Chesbrough, H. (2003). Open Innovation – The New Imperative for Creating and Profiting from Technology. Harvard Business Press

2322

Dip

lom

ac

ia c

or

po

ra

tiv

a

8. How does the organization come

to terms with these changes?

is it ready and does it have

the competences required by

this new relational framework?

i t seems clear that the

management of this complicated

agenda constitutes a highly

significant factor for competing

in a global world.

an interpretation of the results

o f the s tudy conducted

appears to indicate that

Senior management is chiefly

supported by two departments

in the implementation of the

Corporate Diplomacy agenda,

namely Public Affairs and

Communication , as can be

observed in figure 4:

a Cross-functional approach

The function of public affairs is related to the positioned and influential dialogue that companies conduct with the government,

and more specifically, with the regulator and the public monitoring and supervisory bodies. in this regard, it seems that the

regulatory and supervisory tendency of the State will increase in the coming years, affecting every industry, in every way and

in every country7.

15

12

9

20

21

12

13

23

17

10

10

15

13

Source: Internal.

Figure 4. Departments of the Organization Involved with the Content which Leads to the Definitions Considered

Compliance

Board of Directors

Chairmanship

CEO

Foundation

General Management

Country Manager

General Secretariat

Legal Department

Relations with Investors

Business Development

Institutional Relations

Communication

CSR

Reputation

HR

Internal Communication

Departments ≥ 15 mentions

Public Affairs

Marketing

Risks

Information Security

Security of Installations

Strategy

7 Report: “Beyond the Law”, 2013, KPMG Auditors. Available online at https://www.kpmg.com/ES/es/Actual idadyNovedades/A r t i c u l o s y P u b l i c a c i o n e s /Documents/Beyond-the-law-ES.pdf

Committees

2524

Dip

lom

ac

ia c

or

po

ra

tiv

a

The relationship between Corporate Diplomacy and other company departments confirms its cross-functional nature and the difficulty of installing it operationally in any of them while retaining its own autonomy. Throughout the research, it was determined that this inter-disciplinary activity should have points of contact of different intensity with 25 functional company departments, reflected in figure 5:

in order to reach this conclusion, a

questionnaire was sent to a sample of

83 senior executives , asking them to

apportion 100 points in accordance with the

importance of each department in relation

to Corporate Diplomacy. in particular, the

executives highlighted two highly relevant

departments: Public Affairs (which obtained

a score of 10.43) and Institutional Relations

(with a score of 9.52). The areas related to

Senior management, particularly General

management and the Chairmanship, also

received high respective scores of 9.52 and

8.05.

at a lower level there were seven departments,

headed by Communication (6.38), followed by

General Secretariat/Legal Consultancy (5.90)

and the figure of Country Manager (5.00).

Below them came the Senior Management Cabinet, Chief Executive Officer, Corporate Social Responsibility and Reputation.

When, on the other hand, the numbers of

mentions the respondents made to each

department are analysed, the Chairmanship and Communication are those mentioned

most often, both registering 90%. in second

place, with 86% mentions, the executives

indicated the Institutional Relations and

Public Affairs departments. This is shown in

figure 6:

Source: Elaboración propia. Source: Internal.

Figure 5. Relationship between Corporate Diplomacy and Departments within the Organization

Figure 6. Departments Mentioned in the Questionnaires (%)

Barely relevant Relevant Muy relevante

Board of Directors

Chairmanship

CEO

Senior Management Committees

Foundation

General Management

Country Manager

General Secretariat

Legal Department

Relations with Investors

Strategy

Business Development

Institutional Relations

Communication

CSR

Reputation

Human Resources

Internal Communication

Public Affairs

Sales Management / Marketing

Risks

Information Security

Security of Installations

Compliance

Procurement

Board of Directors

Chairmanship

Chief Executive Officer

Senior Management

Committee

Foundation

General Management

Country Manager

General Secretariat / Legal

Department

Relations with Investors

Strategy

Business Development

Institutional Relations

Communication

CSR

Reputation

Human Resources

Internal Communication

Public Affairs

Marketing

Sales Management

Risks

Technological Security

Security of Facilities

Compliance

Procurement

n = 21

0 10 20 30 40 50 60 70 80 90 100

2726

Dip

lom

ac

ia c

or

po

ra

tiv

a

in terms of the order of importance for Corporate Diplomacy, the department

the respondent executives most often put in first place was Public Affairs, followed by the Chairmanship. in third place, General Management, Institutional Relations, the Country Manager and Reputation were

mentioned in the same proportion.

Finally, in order to obtain greater precision with regard to the scope of

the concept of Corporate Diplomacy, the 25 management and functional

departments were grouped together into four categories: management,

Stakeholders, Corporate responsibility and Business management. although

the data appeared to indicate that CD management is a task for Senior

management, it was necessary to proceed to incline its internal position

towards a functional group. Therefore, the scores given by the respondents

for each department or functional unit were added together, as shown in

figure 7:

Senior Management

48%

22%

14%

19%

Corporate Responsibility

Stakeholders

Business Management

Source: Internal.

The results confirm that Corporate Diplomacy is a discipline directly supervised by Senior management and that its functional scope is related, to a large

extent, with the departments in charge of stakeholder management.

Figure 7. Áreas citadas en los cuestionarios (%)

2928

Dip

lom

ac

ia c

or

po

ra

tiv

a

risk management is not

new for today’s company

management. However, what

is new is the speed of change

and the interaction between

different types of risks, which

lead to highly-volatile scenarios

of enormous uncertainty, as

shown in figure 8:

3.5 4.0

4.0

4.5

5.0

4.76average

4.87average

4.5 5.0 5.5

The complex map of forces involved in the globalization process intensifies its tension by including, in addition to the frictions between global and local

systems or the lack of governance, a new multi-polar scale which leads to changes in political leadership, the fragmentation of power, the emergence of

new trade blocs and a lack of capacity to respond to new global threats, such as organized crime, cyber-terrorism and Jihadist terrorism (figure 9).

1 large-scale involuntary migration

2 extreme weather events

3 Failure of climate-change mitigation and adaptation

4 interstate conflict

5 Natural catastrophes

6 Failure of national governance

7 Unemployment or underemplyment

8 Data fraud or theft

9 Water crises

10 illicit trade

1 Failure of climate-change mitigation and adaptation

2 Weapons of mass destruction

3 Water crises

4 large-scale involuntary migration

5 energy price shock

6 Biodiversity loss and ecosystem collapse

7 Fiscal crises

8 Spread of infectous diseases

9 asset bubble

10 profound social instability

economic

environmental

Geopolitical

Societal

Technopolitical

Top 10 risks in terms of Likelihood

Top 10 risks in terms of Impact

Categories

9. a New panorama of risk

Source: Global Risks Perception Survey 2015. World Economic Forum

Source: Global Risks Perception Survey 2016. World Economic Forum

Figure 9. Global risk ranking

Figure 8. Global risk panorama

PROBABILITY

IMP

AC

TWeapons of mass destruction

Spread of infectous diseases

Critical information infrastructure breakdown

Failure of critical infrastructure

Biodiversity loss and ecosystem collapse

Fiscal crises

asset bubble

Failure of financial mechanism or

institution

Cyberattacks

adverse consequences of technological advances

Failure of urban planning

Food crises

profound social instability

energy price shock

Water crises

Deflation

Unemployment or underemployment

extreme weather events

illicit trade

State collapse or crisis

Failure of national governance

Natural catastrophes

large-scale involuntary and

adaptation

Terrorist attacks

Data fraud or theft

Failure of clmate-change mitigation and adaptation

man-made environmental catastrophes

interstate conflict

Unmanageable inflation

3130

Dip

lom

ac

ia c

or

po

ra

tiv

a

in a recent survey conducted by pWC in which 1,408 Ceos in 83 countries were interviewed, 66% perceived more threats. The

survey also suggested greater complexity resulting from multiple economic systems, local regulatory processes and the emergence

of regional trade pacts and blocs (figure 10).

A global world bank

Climate change and environmental damage

Regional investment banks

Q: For each alternative, please select the one that you believe the world is moving more towards

Q: How concerned are you about the following potential economic, policy, social

and business threats to our organization’s growth prospects?

The business risk caused by hyper-regulation is given in the same

pWC survey by 79% of the respondents as the main problem

currently facing companies (figure 11).

This new state of affairs demands a new approach from organizations

with regard to the handling of global risks. it is necessary to establish

a specialist system of fluid information which acts proactively and

in a timely fashion. The selection of sources and their links is one of

the functions of corporate diplomacy.

Figure 10. ceosmustnavigateanincreasinglycomplicatedandmulti-polarworld

Figure 11. CEOs are getting more concerned about a wide range of risks

39%

35%

22%

15%

14%

72%

15%

53%

59%

75%

81%

83%

25%

79%

over-regulation

79%

Geopolitical uncertainly

74%

Exchange rate volatility

73%

Top 3 threats

Key threats

79%

74%

73%

72%

71%

69%

65%

61%

60%

55%

50%

Over-regulation

Geopolitical uncertainly

Exchange rate volatility

Availability of key skills

Government response to fiscal deficit and debt burden

Increasing tax burden

Social instability

Cyber threats

Shift in consumer spending and behaviours

Lack of trust in business

Political unions

Economic unions and unified economic models

Single global marketplace

Single global rule of law and liberties

Commonglobal beliefs and value systems

Free and open access to the internet

Nationalism and devolved nations

Multiple economic models

Regional trading blocs

Multiple rules of law and liberies

Multiple beliefs and value

systems

Fragmented access to the internet

Source: Redefining business success in a changing world. 19th Annual Global CEO Survey / January 2016. PWC. Source: Redefining business success in a changing world. 19th Annual Global CEO Survey / January 2016. PWC.

3332

Dip

lom

ac

ia c

or

po

ra

tiv

a

10. Traditional approach vs. New approachTraditional public diplomacy serves as an aid to visualizing this business function which is being described. Historically speaking, the accredited diplomatic

corps in a country has the following functions:

1) REPRESENTATION OF THE STATE, in

a permanent mission. Diplomatic activity

takes place in respect of all kinds of subjects

and is conducted in an uninterrupted and

simultaneous manner, pursuing the interests of

the country and the protection of its citizens.

although there are currently multiple forums for

bilateral and multi-lateral diplomatic exchange,

the permanent presence of representatives

remains a basic pillar of these relations, owing

to the inter-dependence of States, the existence

of global problems whose solution requires

international cooperation and the worldwide

repercussion of events of different kinds.

2) NEGOTIATION, which, in iklé’s words, is

based on “a process of interaction by means of

which governments explicitly attempt to carry

out a new combination of their common and

opposing interests” (iklé, F.C., 1964)8.

3) OBSERVATION AND INFORMATION, directly

and in the field, using the appropriate sources.

its purpose is to remain as fully and accurately

up to date as possible, on all the events which

occur in the receiving State and to inform the

State being represented. Diplomatic agents

must be able to introduce themselves into the

different spheres and sectors of the society of the

receiving State and maintain good relations with

the organizations and figures with the greatest

prominence and influence in the life of the State,

not only in the political domain but also in the

economic and social worlds.

8 Iklé, Fred Charles. ‘How Nations Negotiate’. New York Harper & Row, 1964

These functions indicated above can be transferred to the business world, in which companies used to resolve their problems

in an almost unilateral manner, by means of the application of the DaD (Decide, apply, Defend) model. in a generally reactive

manner, when a company faced a problem, it identified the appropriate interlocutor and addressed him or her either directly

or through intermediaries/facilitators, in order to resolve it in the fastest and most expeditious manner possible, taking into

account the interests of the decision-makers, but only giving a certain degree of consideration to the interests of any third

parties that might be affected.

Thus, the dialogue consisted of the messages and directional content that the company provided to the interlocutors they

deemed appropriate. open dialogue only took place in special circumstances with, of course, the stakeholders, and when

considered most appropriate.

Nowadays, this directional system has been radically altered and the communication agenda is being increasingly affected

by priorities imposed from the outside. in a society whose institutions are under suspicion, companies and entrepreneurs are

subject to thorough scrutiny by multiple stakeholders. Bad practice in the labour field, influence peddling, corruption, tax evasion,

commercial cartels, and so on, have generated a prevalent situation of mistrust that companies must endeavour to remedy.

according to the Trust Barometer regarding institutions (metroscopia, 2015), 43% of Spaniards put their trust in large Spanish

companies, while 35% trust the multinational companies operating in Spain. in keeping with what was found in edelman’s

2016 Trust Barometer, the public trust private enterprises more than the Government, parliament, trade unions and political

parties (figure 12).

3534

Dip

lom

ac

ia c

or

po

ra

tiv

a

91 7 Public health service doctors

89 6 Scientific researchers

88 8 Small and medium-sized enterprises

86 9 State education teachers

84 12 NGOs

82 15 The police

81 15 The Civil Guard

80 17 The Church's social work (Cáritas)

78 16 The municipality's social services

76 19 King Felipe VI

74 23 The University

66 24 The Spanish Armed Forces

64 25 Lawyers

60 35 The press (newspapers)

55 37 Tax inspectors

53 38 The Supreme Court

54 40 Judges, in general

52 39 Public prosecutors, in general

53 44 Public health

49 41 The Constitutional Court

47 42 Parish priests

48 46 Town and city councils

The Catholic Church 45 51

Large Spanish companies 43 50

The Autonomous Communities 39 54

Parliament 38 58

Multinationals 35 56

The State Government 34 64

Trade unions 33 64

The employers' organization 27 60

Bishops 21 69

Political parties 21 75

Banks 20 78

Politicians 17 79

Approves

Approves

Disapproves

Disapproves

BALANCE APPROVES-DISAPPROVES

BALANCE APPROVES-DISAPPROVES

Replies in %

+84

+83

+80

+77

+72

+67

+66

+63

+62

+57

+51

+42

+39

+25

+18

+15

+14

+13

+9

+8

+5

+1

-6

-7

-15

-20

-21

-30

-31

-33

-48

-54

-58

-62

Source: Metroscopia. 2015

Figure 12. Barometer of Citizens’ Trust in Institutions according to the traditional DaD model, a multinational company which wished to obtain

a mining concession in an andean country or obtain an oil exploration concession in

the amazon jungle negotiated directly with the government or the regulator in office

in the country in question, obtained the permits and began its activities, and did not

generally show much interest or pay much attention to any other external stakeholders

that might have been affected.

Nowadays, this process would involve a proactive, comprehensive and detailed agenda

with multiple stakeholders, seeking to pave the way with regard to any contingencies

which may arise.

The legitimacy of the granting of the licence to operate is currently achieved by involving

the society in question, and transparently managing both the expectations and the

potential prejudices which may exist prior to the operation.

The local population which stood to be affected by pollution problems or the destruction

of the natural environment was simply not taken into account, because they were not

assumed to be part of the forum of dialogue in which the decisions were made.

dIalogueenVIronmenT

exTernalsTakeholders

company FACILITATOR/InTermedIary

InTerlocuTor(Government,

Regulator, Trade Unions, etc.)

Figure 13. DAD model (Decide, Act, Defend)

3736

Dip

lom

ac

ia c

or

po

ra

tiv

a

Given the distances between the headquarters of the

parent company and the places where the companies

operated, it was very unlikely that any corporate abuses

or injustices would become known, as a result of which,

companies did not need to take the minority groups

into consideration in the negotiation process.

Nowadays, this approach has changed radically:

let’s consider an NGo devoted to environmental

protection, or other NGos dedicated to defending the

rights of minority indigenous groups, which, with an

ordinary smartphone, can take photos of the impact

on the environment of the activities of multinational

companies, and upload the images onto the internet

(youTube, social media, etc.) in real time, all over the

world – photos of possible sources of pollution which

may affect the health or survival of these indigenous

groups: The reputation of the multinational in question

would plummet, not only in the country where it was

operating, but also in that of its parent company, leading

to a chain reaction from other NGos, consumer groups,

the media, the governments themselves and political

organisations in the multinational’s country of origin,

and so on, which would not only destroy its reputation

but also its value on the stock exchange.

This change of approach would not have been possible

without the changes outlined in previous paragraphs

(the globalization of business activities, social activism,

changes in new information and communication

technology), which have enabled individuals to get

organized and react to the potential bad practice of

companies.

This has forced companies to shift their approach towards a more collaborative or inclusive

model of relationship, as shown in figure 14:

in this new model, the “dialogue forum” has expanded, and it is not only companies and

governments who need to be at the negotiating table, but also, all the groups, people

and organizations that may be affected in some way by the business decisions, and

who will ultimately legitimize the corporate operating licence: Not only do the objectives

and interests of these new “interlocutors” have to be borne in mind, but companies also

need to take into account how they are affected. if the affected groups do not give the

company the “social permission” or “social licence” to operate, the company’s activities

might not only be delayed, but they will also be affected by negative publicity or smear

campaigns, which could delay the project in question or even cause it to be abandoned.

once a company has understood who is affected and how, it must establish a fluent

dialogue with each and every one of the affected parties, with the aim of enhancing

its business proposal.

dIalogueenVIronmenT

exTernalsTakeholders

Figure 14. New form of business relations in the 21st century

Traditionally, companies maintained a

strong asymmetrical relationship with

those involved, negotiating only with the

first line of representatives of the most

signif icant stakeholders (governments,

local authorities, politicians, trade unions,

the media, etc.) in a bilateral or unilateral

manner, using facilitators or intermediaries

in order to reach agreements and, once they

were reached, it executed them in a one-

directional manner. Therefore, we could say

that Corporate Diplomacy was conducted

in a “courtly” fashion. This company-centric

approach did not consider the potential

affected parties as “equals” and, if a crisis

broke out or an incident occurred, it was

resolved “tactically”, in a reactive manner and

on a case-by-case basis.

in the new dialogue forum of the 21st

centur y, the situation has changed

radically: Discussions are multilateral, and

include a wide variety of interlocutors who

are directly or indirectly affected by the

action of the company in question. These

include NGos, environmental defence

organizations, human rights groups, the

media, consumer associations, and the

governments of the parent companies of

the multinationals involved, to name just

a few examples (Fig. 15)

DIPLOMATIC ACTION AGENDA

Shareholders

Employees Suppliers

Competitors

Financial Community

PartnersBoard Members

Customers

Business Organizations

Institutional Market

Regulator

Non-differentiated

External Pressures

Public and Regulatory

Bodies

Social Agents

The media

Social Networks

Source: Internal

Figure 15. Multiple stakeholders affect the agenda of the current organization

company FACILITATOR/InTermedIary

InTerlocuTor(Government,

Regulator, Trade Unions, etc.)

3938

Dip

lom

ac

ia c

or

po

ra

tiv

a

The “multilateralization” of the discussions has led to this approach being participatory and more inclusive, to the extent that the

opinions of the weakest stakeholders are taken into account. Therefore, far from being perceived as the epicentre, companies

begin to adopt a “community-centric” approach and are regarded as part of an ecosystem. in the light of this new mentality,

companies have to adopt a more humble vision, come down from their ivory towers and converse and talking to all those

potentially affected by the situation. as a result of this new mentality, companies have to adopt a more proactive stance and

think in a more strategic, long-term manner, in which the approach does not have to be a matter of solving the crisis, nor even

anticipating it to see how it can be solved, but rather avoiding it.

The differences between the two approaches are summarized in the following table:

Differences between traditional business diplomacy and New Corporate Diplomacy

TRADITIONAL DIPLOMATIC RELATIONS newdIplomaTIcrelaTIons

Unilateral and unidirectional (DaD approach) multilateral and multi-directional

The company as the epicentre of the activity The company as part of the ecosystem

reactive: resolving the crisis proactive: aiming for anticipation

Tactical and focusing on solving problems in the short term Strategic, multi-scale, focusing on the medium and long term

Based on public relations Based on institutional relations and influence as a management process

elitist, “courtly” relations, with a small number of stakeholders open, inclusive relations, with a large group of stakeholders

model with little transparency Transparent model

Source: Internal.

4140

Dip

lom

ac

ia c

or

po

ra

tiv

a

11. PReSSuRe fRoM SoCiety

Skills and Competences of Corporate Diplomacy

in 1987, the Bründtland report9, expressly drawn up for the UN, used the term “sustainable development” for the first time,

defining it as “that which satisfies the needs of the present without compromising the ability of future generations to meet

their own needs”. perhaps, not for the first time, but in a very relevant manner, it warned of the need for countries and

companies to change their global structures and relationships in order to avoid endangering the natural ecosystems which

sustain life on earth.

Today, almost three decades later, concern for the planet and looking after it constitutes one of the priority issues on company

agendas (along with others, such as human rights, fair trade, respect for minorities, ethics in business, etc.), influenced by a

society which, by means of different platforms and stakeholders, demands that they play a more active role in corporate

social responsibility policies that symbolize the organization’s position, in this specific case, with regard to the environment

and ecology.

Nowadays, companies must continually expose themselves to public opinion in a transparent and proactive way, as a result

of the arrival of new technological resources such as the internet and mobile telephony, which have allowed the different

agents to communicate in an instantaneous and continual manner. all the above has led to a significant increase in the

pressure of society and its different agents on organizations, which not only now have to hold a position on the most critical

issues for society, but also have to actively contribute to their solution by means of specific investments and activities.

This public scrutiny has increased the role of the Third Sector beyond its

usual tasks of denunciation and monitoring, to the extent that nowadays,

some NGos acquire shareholdings in large companies, enabling them to

participate as full members in the decision-making process of General

meetings. This is a challenge of maximum interest for companies, taking into

account the increase in the number of agents with whom an organization

must maintain fluent relations in order to guarantee the fulfilment of

its strategic objectives, which exceeds the usual number of agents: the

Government, shareholders, customers and suppliers.

To the above we must add that, on a global scale, a progressive loss of

company credibility can be observed in the eyes of the public, resulting from

the high-profile corruption scandals that came to light during the recent

financial crisis. in response to this situation, governments have, in recent

years, introduced regulatory instruments to promote the transparency of

organizations and to protect their shareholders, within what are known as

good corporate governance practices.

in other words, companies nowadays are required to go much further than

drawing up a code of ethics and creating a department to protect the rights

of its workers. What is required of them is that they should be committed

to society and its problems, that they should actively participate with regard

to critical issues and, of course, ensuring that everything is done in the most

transparent way possible, so that any agent has real possibilities of evaluating

their behaviour.

This current-day business commitment must incorporate the social, ethical

and environmental concerns of society’s agents, from the perspective of

corporate responsibility towards its different stakeholders. Beyond simply

seeking economic benefit, the objective should be to promote well-being

in society by, for example, promoting the creation of stable and quality

employment and implementing policies of a social nature, freely agreed

upon by the workers.

These and other initiatives, encompassed within CSr (Corporate Social

responsibility) policies, go beyond compliance with the legal, fiscal and

employment obligations established by legislation. in fact, it is a matter of

creating a framework in which companies can manage their operations in

such a way that they foster economic growth and competitiveness, while

ensuring the protection of the environment and enhancing the social impact

of their business activity.

in short, it is a question of establishing a company which is sustainable within

a global ecosystem, based on four key criteria:

1. maximizing the creation of wealth for society by means of a proactive

attitude and within parameters which satisfy the wishes of their

stakeholders

2. promoting the creation of fluent communication channels with social

agents, which foster the establishment of common ground for the solution

of problems and conflicts

3. Having a leadership strategy which takes advantage of the continuous

opportunities for improving goods, products, procedures and attitudes

4. Being able to differentiate themselves from other competitors in the

industry by means of intangible elements such as ethical criteria, social

responsibility and posture on sensitive issues.

9 Bründtland, G.H. (1987). Our Common Future: The World Commission on Environment and Development, Oxford, Oxford University Press

4342

Dip

lom

ac

ia c

or

po

ra

tiv

a

New Executive Skills for the New Society: Defining the Profile of the Corporate Diplomat

in order to analyse these new organizational skills, eleven specialists10 with different specialities (Headhunting, Human resources

and international Business) were brought together.

almost all the working group (83%) regarded this new function as having a strong impact on financial statements, although

they highlighted the difficulty of quantifying this contribution. However, 50% of them stated that, so far, companies have only

developed this function to a very preliminary stage.

among the main responsibilities of this new function, the group of experts highlighted support for the parent company in the

resolution of conflicts, the positioning of the company and the advocacy function (as a representation of interests), especially

with regard to the management of relations with the regulator.

it was unanimously stressed that organizations will incorporate this function over the coming years as a fundamental part of

their influence strategy, with the major challenge of creating the most favourable environment possible for their interests. as a

result of the above, the incorporation of professionals in the field, with a set of specific qualities and skills which will contribute

to the success of the management of a company’s Corporate Diplomacy agenda, will be essential.

10 Aguilar, Adolfo. Manager of Communication and Public Affairs, Thales Group; Bueno, Belén. HR Manager at Editorial Santillana; Cantera, Javier. Chairman of BLC; Dinesen, Elena. Chief Talent Off icer at SACYR; Fajardo, Plácido. Directorial Partner, Leaders Trust; Gascón, Ramón. Manager of Institutional Relations and Public Af fairs , BBVA; Gasset , Ignacio. Chairman of Gasley Consultora; Luis , Iñigo. Project Manager, Korn Ferry International; Marrodan, Jesús . Partner, Korn Ferry International; Truchado, Luis. Partner, Odgers Berndtson and Zuil, Miguel Angel. Directorial Partner, Boyden

11 h t t p s : / / w w w . k o r n f e r r y .com/product s /korn-fer r y -leadership-architect /k f la-overview

This defined profile provides twelve essential characteristics for organizations which wish to develop the key competencies for diplomatic work among their executives. executives act as company ambassadors; therefore, it is considered essential for them to develop these skills.

Profile of the Corporate Diplomat – Skills

in order to establish the profile, we worked with the Korn Ferry leadership architect methodology11, based on the selection and evaluation of competencies.

The twelve competencies identified are outlined below.

1. Communication skills: enabling them to convey messages in an appropriate and effective manner, while adapting them to different audiences and situations. in this regard, rhetoric and the ability to speak in public are also key elements.

2. having the qualities of any good diplomat: veracity and credibility, representativeness, precision, moral and intellectual certitude, good character, subtlety, patience, impartiality, loyalty to the organization and respect for stakeholders.

3. Public Relations: conducting business in a manner which is always in line with the company’s strategic objectives. in other words, being a businessperson who fosters new relationships and strengthens those which already exist.

4. business strategy and vision: which is reflected in being able to build a relational map with the various agents, detecting institutions, companies and advocates that may be of interest, as well as the way of forming links with them.

5. being a specialist in marketing: enabling them to make the most of opportunities in the market and to anticipate changes in the habits and attitudes of stakeholders. anticipation and knowledge will be two of their most important skills.

6. team management and leadership: in the event of having people under their responsibility in a department within the organization. management skills and human resources are critical in this regard.

7. Risk analysis: in order to search for, identify and implement the most favourable conditions for conducting the organization’s activities. Financial and economic knowledge will be essential in achieving this business vision.

8. Mediation: allowing them to assume the appropriate attitude in the event of potential conflicts, as well as having a proactive attitude in the generation of partnerships and agreements which may prove profitable for the future of the organization.

9. entrepreneurism: with a thorough knowledge of the organization and the segments of its activity, with an ability to detect business opportunities, favouring the growth of the entity and increasing its global presence.

10. Ability to negotiate: which involves not only having the necessary skills to do so, but also having the authority within the organization to reach binding agreements on its behalf within set parameters.

11. Adaptability and flexibility: essential elements for adapting to the constantly changing conditions of the market and its stakeholders, which enable suitable management of any uncertainty when it comes to making decisions.

12. Sensitivity: which means always bearing in mind the concerns and demands of the various stakeholders, as well as the effects of any decision on third parties, thus preventing potential situations of friction in the future.

4544

Dip

lom

ac

ia c

or

po

ra

tiv

a

12. The major Challenges for Corporate Diplomacy

• The Ceo is the great diplomat of the organization: the person who

represents the interests of a company at the highest level.

• The main challenge facing the organization is to incorporate information

into a single diplomatic action agenda. at present, companies’ relational

strategies have been fragmented into multiple internal departments. This

integration will allow a pooling of resources, the assigning of responsibilities

and the execution of a plan in accordance with a high-level strategy.

• The ultimate goal is to create a framework of favourable business

relationships in which CD will act as a tool used by a company’s general

management to pave the way towards achieving results.

• The business intelligence aspect of CD is an effective way of obtaining

relevant information for the business in advance.

• Nowadays, there can be no strategic planning which does not include a

detailed framework of relations with its stakeholders. The management

of relational capital must measure the return on the resources it employs.

• The more transparent an organization becomes, the larger its field of

exposure and risk within society. as a result of corporate diplomacy, it is

possible to appropriately conduct interactions with the stakeholders.

• regulatory risk must be managed proactively. The incorporation of the

organization’s CD function is critical for the detection and anticipation of

these risks.

• it is important to encourage the creation of more proactive and long-

term business strategies, based on the establishment of partnerships

and cooperation agreements, as well as the total alignment of corporate

activities with entities’ communication policies (the constant development

of networks and coalitions with a direct impact on companies’ financial

statements).

• another challenge is to become a cornerstone for the development of

ethical companies, which has a fully social vocation and is integrated with

its environment and all its stakeholders and establishes relations of mutual

benefit and interest with them.

• Finally, the aim is to be one of the epicentres of innovation within

companies, creating business opportunities and being the basis for the

design of business operations, as a promoter of new vehicles of influence.

4746

Dip

lom

ac

ia c

or

po

ra

tiv

a

13. 1

5

37

2

6

4

Conclusions

CD is making rapid progress towards equipping organizations

with a powerful tool which can help them to position

themselves as legitimate and influential agents.

The company of the 21st century is, first and foremost, a

relationship machine which feeds on filtered information

provided by corporate diplomacy. The aim is to establish

a solid framework of differentiation enabling interaction

with segmented stakeholders in accordance with a pre-

established plan.

Just as in modern states, in which the diplomatic function

is essential for representing national interests to third parties,

modern-day organizations need corporate diplomats to

ensure they have an influential presence in the markets in

which they operate.

research highlights the need to review current capabilities

with regard to relational capital management in order to

address increasingly complex scenarios.

The responsibility for CD management corresponds

mainly and directly to a company’s senior management.

The ability of a company to differentiate itself in

its structured dialogue with the Government and

the regulator becomes a competitive element. CD

management plays a key role in this regard.

public affairs, institutional relations and Communication

are the departments with greatest exposure to CD.

4948

Dip

lom

ac

ia c

or

po

ra

tiv

a

14. 14. Bibliography and Sources Used

Adams, C. (2014). reinventing the Company in the Digital age madrid.

BBVa.

Alonso, E. (2016). lobbying in the european Union: manual on the Good

Use of Brussels madrid. eSiC Business marketing School.

amann,w.,khan,s.,salzmann,o.,steger,u.,Ionescu-somers,a.(2007).managing external pressures through Corporate Diplomacy Journal of

General management.

Barometer of Public Trust in Institutions (2015). metroscopia.

Bründtland , G.H. (1987). our Common Future The World Commission on

environment and Development, oxford, oxford University press

Cachinero, J., Bermejo, M. and Manfredi, J.L. (2013). leadership in the

Society of Change: Corporate Diplomacy, reputation and Business Schools

madrid. Developing ideas, llorente & Cuenca.

eystudycentre(2016).report: Building Trusted relationships through

analytics and experience ey.

Chesbrough, H. (2003). open innovation – The new imperative for Creating

and profiting from Technology Harvard Business press.

bankinterdebate:conversationbetweenJosuugarteandJosémaríao´kean,29october2015. http://blog.bankinter.com/blogs/bankinter/

archive/2015/10/29/debate-bankinter-cara-a-cara-entre-jose-maria-okean-

josu-ugarte.aspx

Edelman Trust Barometer (2016). edelman.

henisz,w. (2014).Corporate Diplomacy: Building reputations and

relationships with external Stakeholders. Greenleaf publishing.

Iklé, F.C. (1964). How Nations Negotiate New york Harper & row.

Report: “Beyond the Law”, 2013, KpmG auditors. available online at https://

www.kpmg.com/eS/es/actualidadyNovedades/articulosypublicaciones/

Documents/Beyond-the-law-eS.pdf.

kotter,J.(1990).The leadership Factor madrid. ediciones Díaz de Santos.

ReSeARCh teAM

RAFAEL CABARCOS: executive Chairman of the

international institute of Corporate Diplomacy (iiDC). He

was Corporate Director of the prisa Group for 11 years.

He previously held the position of Human resources

Director of Global Banking at the Santander Group. He

obtained a degree in philosophy and psychology at the

autonomous University of madrid. He obtained an mBa

from the Company institute.

CARLOS S. PONZ: iiDC partner. economic journalist, with

a master’s Degree in economic information obtained

from the Universidad Complutense de madrid (Spanish

initials: UCm), a master’s Degree in Health Journalism

(UCm), a master’s Degree in entrepreneurial initiative and

Creation of Companies (Carlos iii). He worked as an editor

at several media outlets, such as expansión, Capital,

emprendedores, onda Cero and el mundo, and as an

institutional relations and communication consultant

for companies such as electrolux, Bankia, Google, enel

and Bet365.

kotter,J.(2008),schlesinger,l.a.Choosing Strategies for Change Harvard

Business School review.

mckinseyglobalInstitute(2015).report: playing to Win: The new Global

Competition for Corporate profits mcKinsey & Company.

mckinseyglobalInstitute(2016).report: Digital Globalization: The New era of

Global Flows mcKinsey & Company.

Montañés, P. (2012). political intelligence: Creative power in organizations madrid.

pearson.

Omil, J. (1997). Company management: Based on open and Dynamic Dialogue

madrid. ediciones pirámide.

pwc(2016).19th annual Global Ceo Survey. redefining Business Success in a

Changing World. Ceo Survey priceWaterhouseCoopers.

Vilariño, E. (2011). Course in Diplomatic and Consular law madrid. editorial

Tecnos.

5150

Dip

lom

ac

ia c

or

po

ra

tiv

a