Business & Society Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western, a part of Cengage Learning 1

Chapter 5 Strategic Management and Corporate Public Affairs © 2012 South-Western, a part of Cengage Learning 2

Learning Outcomes © 2012 South-Western, a part of Cengage Learning 1.Describe the concept of corporate public policy and relate it to strategic management. 2.Articulate the four major strategy levels and explain enterprise-level strategy. 3.Explain corporate social performance reporting. 4.Identify the major activities of public affairs departments. 5.Highlight key trends with respect to the public affairs function. 6.Link public affairs with the strategic management function. 7.Indicate how public affairs may be incorporated into every manager’s job. 3

Chapter Outline The Concept of Corporate Public Policy Four Key Strategy Levels The Strategic Management Process Public Affairs Public Affairs as a Part of Strategic Management The Corporate Public Affairs Function Today Useful Public Affairs Concepts Public Affairs Strategy Incorporating Public Affairs Thinking into All Managers’ Jobs Future of Corporate Public Affairs in 21 st Century Summary Key Terms Discussion Questions 4 © 2012 South-Western, a part of Cengage Learning

The Concept of Corporate Public Policy © 2012 South-Western, a part of Cengage Learning 5 Corporate public policy is a firm’s posture, stance, strategy or position regarding the public, social, global, and ethical aspects of stakeholders and corporate functioning Affirmative Action Sexual harassment Product safety Employee privacy Environmental Sustainability

Corporate Public Policy and Strategic Management Strategic management Refers to the overall management process that focuses on positioning the firm relative to its market environment. Corporate public policy The part of overall strategic management that focuses specifically on the public, ethical, and stakeholder issues the firm faces. © 2012 South-Western, a part of Cengage Learning 6

Relationship of Ethics to Strategic Management For business ethics to have meaning it must be linked to business strategy because the linkage permits management issues to be addressed in ethical terms. The concept of corporate public policy and the link between strategic management and ethics can be better understood in terms of Four key strategy levels Steps in the strategic management process 7 © 2012 South-Western, a part of Cengage Learning

Four Key Strategy Levels Enterprise-level strategy “What is the role of the organization in society?” Corporate-level strategy “In what business should we be?” Business-level strategy “How should we compete in a given business or industry?” Functional-level strategy “How should a firm integrate subfunctional activities and relate them to its functional areas?” 8 © 2012 South-Western, a part of Cengage Learning

Manifestations of Enterprise-Level Thinking Codes of ethics Codes of conduct Mission statements Values statements Corporate creeds Vision statements Policy-oriented codes and statements 9 © 2012 South-Western, a part of Cengage Learning

Core Values The deeply ingrained principles that guide all of a company’s actions and decisions. They serve as cultural cornerstones. 10 © 2012 South-Western, a part of Cengage Learning

Enterprise-Level Strategic Thinking Establishment of committees Public policy/issues Ethics Governance Social audit Corporate philanthropy Corporate citizenship Ad hoc committees  Public affairs office  Identification/analysis of social or public issues 11 © 2012 South-Western, a part of Cengage Learning

The Strategic Management Process 1.Goal formulation 2.Strategy formulation 3.Strategy evaluation 4.Strategy implementation 5.Strategic control 6.Environmental analysis  Know the components of strategy formulation. 12 © 2012 South-Western, a part of Cengage Learning

Strategic Corporate Social Responsibility Responsive CSR Addresses generic social impacts through good corporate citizenship and value chain social impacts by mitigating harm. Strategic CSR Transforms value chain social impacts into activities that benefit society while reinforcing corporate strategy. Advances strategic philanthropy that leverages competitiveness. 13 © 2012 South-Western, a part of Cengage Learning

Social Auditing and Performance Reporting Three Essential Steps 1.Set standards against which performance may be compared. 2.Compare actual performance with planned performance. 3.Take corrective action to bring actual and planned performance into alignment. 14 © 2012 South-Western, a part of Cengage Learning

The Social Audit A systematic attempt to identify, measure, monitor, and evaluate an organization’s performance with respect to its social efforts, goals, and programs. 15 © 2012 South-Western, a part of Cengage Learning

Drivers for Social Performance Reports  Expectations from societal and public interests groups  Globalization 16 © 2012 South-Western, a part of Cengage Learning

Ceres A national network of investors, environmental organizations and other public interest groups working on sustainability challenges.  Has an annual award for Sustainability Reporting. 17 © 2012 South-Western, a part of Cengage Learning

CorporateRegister.com A free directory of company-issued CSR, Sustainability, and Environment reports from around the world. Has the most comprehensive data on social performance reports.  The number of corporate reports issued is on the rise. 18 © 2012 South-Western, a part of Cengage Learning

Global Reporting Initiative Established in 1997 by Ceres. Mission to establish global standardized guidelines for reporting on economic, environmental, and social performance of corporations, governments, and NGOs. The Sustainability Reporting guidelines are the first global framework for sustainability reporting. 19 © 2012 South-Western, a part of Cengage Learning

Public Affairs The management processes that focus on the formalization and institutionalization of corporate public policy. Embraces Corporate public policy Issues and crisis management Governmental relations Corporate communications 20 © 2012 South-Western, a part of Cengage Learning

The Corporate Public Affairs Function Today 1.The growing magnitude and impact of government. 2.The changing nature of the political system. 3.The recognition by business that it was being outflanked by interests counter to its own. 4.The need to be more active in politics outside traditional community-related aspects. 21 © 2012 South-Western, a part of Cengage Learning

Influence on Corporate Strategy Public Affairs: Identifies/prioritizes public policy issues. Comments on strategic and business plans for sensitivity to emerging political/social trends. Provides a forecast of political/social trends. Implements the strategic and business planning process. Is represented on corporate planning committee. 22 © 2012 South-Western, a part of Cengage Learning

Important Public Affairs Concepts  Looking out and looking in  Buffering and bridging  Tools and techniques  Ethical guidelines 23 © 2012 South-Western, a part of Cengage Learning

Looking Out and Looking In The public affairs function serves as a window Looking out, the organization can observe the changing environment. Looking in, the stakeholders in that environment can observe, try to understand, and interact with the organization. 24 © 2012 South-Western, a part of Cengage Learning

Buffering and Bridging Two types of corporate public affairs activities 1.Activities that buffer the organization from the social and political environment. 2.Activities that bridge the organization with that environment. 25 © 2012 South-Western, a part of Cengage Learning

Tools and Techniques Environmental monitoring/scanning Working with the grassroots Constituency building Issue advertising Lobbying Political action committees Corporate social audits Web activism Coalitions and alliances Community investment Stakeholder management 26 © 2012 South-Western, a part of Cengage Learning

Global Public Affairs The global dimension of public affairs has expanded Companies expanding into new markets Changes in sales in existing markets Changes in CEO priorities Changes in regulatory burden Acquisition of new business units 27 © 2012 South-Western, a part of Cengage Learning

Public Affairs Strategy Best corporate social performance Institution oriented management philosophies Collaborative/problem-solving strategy Worst corporate social performance Organizations that operate as independent economic franchises Individual/adversarial external affairs strategy 28 © 2012 South-Western, a part of Cengage Learning

The Future of Public Affairs 1.Public affairs can help to develop value- based enterprises. 2.Public affairs executives can assert themselves as thought leaders. 3.Public affairs specialists have the opportunity to seek alternative arenas of resolution globally and domestically. 29 © 2012 South-Western, a part of Cengage Learning

Key Terms Business-level strategy Collaborative/problem- solving strategy Core values Corporate-level strategy Corporate public affairs Corporate public policy Enterprise-level strategy Global Reporting Initiative Individual/adversarial external affairs strategy Issues and crisis management Public affairs (PA) Public affairs department Public affairs management Public affairs strategy Public relations (PR) Social audit Social performance report Strategic management Strategic management processes Value shift © 2012 South-Western, a part of Cengage Learning 30