1. Copyright © 2003 by South- Western, a division of Thomson Learning1 Chapter Two Stakeholder And Issues Management Approaches

2. Copyright © 2003 by South-Western, a division of Thomson Learning 2 Chapter Topics 1.Why use a stakeholder management approach for business ethics? 2.Stakeholder management approach defined 3.How to execute a stakeholder analysis 4.Stakeholder approach and ethical reasoning 5.Moral responsibilities of functional area professionals 6.Three issues management approaches 7.Two crisis management approaches

3. Copyright © 2003 by South-Western, a division of Thomson Learning 3 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

4. Copyright © 2003 by South-Western, a division of Thomson Learning 4 Stakeholder Management Approach Defined The stakeholder approach provides a framework that enables users to map and ideally, manage the corporations 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.

5. Copyright © 2003 by South-Western, a division of Thomson Learning 5 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 corporations policies, procedures, or action toward others.

6. Copyright © 2003 by South-Western, a division of Thomson Learning 6 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 stakeholders interest Assessing the nature of each stakeholders power Constructing a matrix of stakeholder moral responsibilities Developing specific strategies and tactics Monitoring shifting coalitions

7. Copyright © 2003 by South-Western, a division of Thomson Learning 7 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?

8. Copyright © 2003 by South-Western, a division of Thomson Learning 8 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 enterprises attention and moral decision-making process on external events. This approach applies internally, especially to individual managers in and across traditional function areas.

9. Copyright © 2003 by South-Western, a division of Thomson Learning 9 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)

10. Copyright © 2003 by South-Western, a division of Thomson Learning 10 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

11. Copyright © 2003 by South-Western, a division of Thomson Learning 11 Three Issues Management Approaches 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

12. Copyright © 2003 by South-Western, a division of Thomson Learning 12 Three Issues Management Approaches 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

13. Copyright © 2003 by South-Western, a division of Thomson Learning 13 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

14. Copyright © 2003 by South-Western, a division of Thomson Learning 14 Two Crisis Management Approaches 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

15. Copyright © 2003 by South-Western, a division of Thomson Learning 15 Two Crisis Management Approaches 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 firms philosophy, motto, or mission statement Use the firms closeness to customers and end users for early feedback

16. Copyright © 2003 by South-Western, a division of Thomson Learning 16 Two Crisis Management Approaches 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 firms culture Output, instead of process, is the focus