CSR: The conceptual

backdrop
Dr. Mamta Hegde
 Initiatives of corporate social
responsibility

CSR initiatives are often broken down into four categories:

environmental, philanthropic, ethical, and economic
responsibility. Environmental initiatives focus on preservation
of natural resources, while philanthropic initiatives focus on
donating to worthy causes that may not relate to a business.

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 Why should corporations think less about shareholder
values and more about social engagement?

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 Do you think concerns regarding ethics will become
important in business? Why?

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 What are the corporate social responsibility initiatives that
may implement to focus on human rights and sustainability,
which includes climate change and environmental protection
in the automobile industry?

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 Introduction
Corporate governance broadly refers to the rules, processes or laws by
which businesses are operated, regulated and controlled.

These functions are, by and large, prescribed by the Companies

Law, governing regulations and codes of practices.

The process of corporate governance has evolved with the beginning of

corporatisation of business since the 19th century.
https://www.youtube.com/watch?v=ppz3wY5L3uE

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 Introduction

A Typical Corporate Governance Scheme in an

Organization

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 Many tend to equate it with an administrative technique, but
corporate governance is a much broader concept; it includes
a fair, ethical, efficient and transparent management that
strives to accomplish certain well-defined objectives—
including social and environmental.
Functional roles of corporate governance
1. Establishing a good and ethical sense of purpose of the business.

2. Structuring the business processes with well-defined objectives to serve shareholders and other
stakeholders.

3. Building a spirit of inclusive growth in the society and within the environment of
Operations.

4. Building a partnership with all stakeholders—internal and external.

5. Thinking and acting in the bigger frame of global businesses.

6. Continually sensitizing the organization to global business changes, environment and

Risks..
7. Finally, always keeping to the right side of the law and environmental regulations.

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A Representative Corporate Governance Structure, showing the position of CEO and
various
management committees that may advise the Board

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 CODES AND STANDARDS OF CORPORATE
GOVERNANCE

(a) Bring transparency and accountability in the functions and decisions;

(b) Seek to establish accountability standards for the company’s board and
management;
(c) Protect investors’ interests.
(d) Care for other stakeholders; and
(e) Promote investor confidence in the business system

https://www.youtube.com/watch?v=lF2_U9duj6s –Uday Kotak

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 For example, to bring in better corporate governance in listed companies, capital
markets regulator in India, the Security and Exchange Board of India (SEBI)
mandated the guidelines for Board composition of listed companies by amending
Clause 49 of the SEBI Act dealing with Listing Agreement.

Purpose of Corporate Governance Codes

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 TYPES OF CORPORATE SOCIAL
RESPONSIBILITY

Corporate social responsibility is traditionally there are

four categories:
• Environmental
• Philanthropic
• Ethical
• Economic responsibility.

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CSR- The Indian perspective
• India is the first country in the world to make corporate social responsibility (CSR) mandatory,
following an amendment to the Companies Act, 2013 in April 2014. Businesses can invest their
profits in areas such as education, poverty, gender equality, and hunger as part of any CSR
compliance.
• The amendment notified in the Companies Act, 2013 requires companies with a net worth of
INR 5 billion (US$70 million) or more, or an annual turnover of INR 10 billion (US$140
million) or more, or net profit of INR 50 million (US$699,125) or more, to spend 2 percent of
their average net profits of three years on
 Role of institutions in CSR

• They have the power to allocate assets and set an agenda that
promotes CSR initiatives.
• They can establish environmental laws, labor laws, and
increase the disclosure requirements of corporations.
Ethics in marketing
DEBATE ISSUE- TAKE A STAND
Is Google Violating Users' Privacy?

With two billion Google searches a day, Google is the preferred search engine for many consumers. Much of its
popularity is due to the superior services it offers. Although Google does not charge for its services, critics point out
that Google's services may actually be costing users their right to privacy. Google keeps all of its users' search
queries forever, although after 18 months these queries become "anonymized." In other words, they cannot be
traced back to the user. Google maintains that it uses these searches responsibly to refine its search engine. It also
has privacy disclosures fully visible on its main page. On the other hand, the Third-Party Doctrine and the Patriot
Act allow the government access to users' Internet information without a judge's oversight for national security
purposes. Google has been subpoenaed in the past by investigators for user information. Even anonymized data
have been used to track a specific person or computer.

1. Google's storage of user data is legitimate and does not constitute a violation of user privacy.

2. Google should not store users' data as this data can be misused or accessed by the government.
Issues of ethics in marketing

• The ethicality of products and services being marketed

• The ethicality of the process and means of marketing
• The ethics in advertising and product promotion
• The ethical conduct of marketing personnel
• The ethicality of marketing goals and targets
• The ethical responsibility for the sales made
Ethical issue in
marketing strategy
• A true marketing minded firms tries to
create values-satisfying goods and
services which the consumers will want
to buy (Levitt) .

• Marketing strategy is designed to attain The original Nestlé boycott started

the marketing objectives of a firm.
• Strategies to deal with competition
in 1977 in protest of Nestlé’s
unethical, aggressive and
harmful marketing of artificial baby
milk in Third World countries. The
company engaged women to
dress up like nurses and distribute
free samples ...
Ethical issues in using communication and IT
in marketing
False and misleading product advertisements in electronic and
cyber media
Exploiting social paradigms for market promotion(fairness
creams)
Predatory pricing by the big and mighty organizations to wipe
competition in the market
Surrogate advertisements (alcohol , cigarettes)
Intrusive service promotions, compromising the confidentiality of
company-client relationships and violating the privacy of
customers ( freebies b y telecom companies to collect personal
data)
Ethical issues in trans-world business relating to national, local ,
and cultural sensitivities
Ethics in 5 Ps of marketing
• Products – are the products ethically right for the consumers and beneficial
to the society?
• Price – is the price commensurate with value (utility) it offers? Is it fair and
competitive?
• Promotion – do the promotional features give a truthful presentation of
the products in offer? Or the campaign exploits the consumers’ ignorance?
• Process – Is the marketing process ethically right and legal ?
• People (consumers) – does the marketing effort harm or hurt the
consumers, the competitors or the society in any known or unknown
manner?
Product
• Unhealthy products, harmful products , not stating the detailed composition of the
product, exaggerating facts
• Unethical product - Cigarette, Government's ban on tobacco advertising
• Safety of the product - Pepsi and Coke Pesticide controversy, Cadbury chocolates
• Product Updating- Availability of spare parts after updating products
Price
• charging higher for a product which is in high demand
• Reducing the price of products, which are not so healthy, for
generating more demand
• Price vs. value

• High prices – taking advantage of patents- Pharma products

• Arbitrary pricing – Cement companies
• MRP- not the final price
Place
• Appropriateness of the places for the promotion

• Avoid selling certain products in some specific places – Liquor near

schools and places of worship
Promotion
• Exchange Offers
• Misleading claims

• Unfair practices – Airlines cancellation scheme

• Have I made it large (Royal Stag) vs. Make it
different (McDowell's No. 1)
• Loreal Hair color
• Cello Maxriter pen is capable of writing 4000 words
Consumer protection – what does it mean
• Date of manufacturing and MRP , weight
• Major ingredients, precautions about harmful effects
• Methods of preservation, date of expiry
• Complete information about the products
• After sales service
• Recalling defective products
• Warranty period
• Free market with many sellers and many buyers
• No hidden cost
Ethical issues in internet marketing
• General responsibilities -
• Compliance with professional ethics of marketing
• Adherence to all applicable laws and regulations to ensure that internet
marketing is not illegal
• Honesty , fairness, and transparency in dealings in deals and taking
responsibilities for actions
• Disclosure of risks
• Respect to the rights and transparency in transactions
• Privacy – customers’ information to be kept confidential and to be used
only for expressed purposes.
• Ownership - information obtained from internet need to be properly
authorized and documented.
• Access – internet marketers should treat access to accounts, passwords,
and other information as confidential and disclose only to the responsible
parties.
Managing Internal Stakeholder

Dr. Mamta Hegde

1
Do you Agree
• A company’s reputation is widely recognized as a
key intangible asset, one that has been argued to
influence value creation.
Justify

2
• Employees contribute to the formation of
corporate reputation through their interactions
with other stakeholders.

• Employees contribute to the formation of

corporate reputation through their interactions
with other stakeholder
• having a good reputation among employees is an
important aspect of a strong reputation

3
• Corporate reputation is defined as by Olmedo-
Cifuentes and Martinez-Leon (2011) as the
‘estimate of the global perception that different
stakeholders have about a company, evaluated
through a set of dimensions and attributes that
create value, are linked to the organization and
distinguish it from the rest’.

4
• Services dominate modern economies, for
example, they represent 73% of the GDP of Britain
and 68% of the GDP of Spain and reputation
management is relatively important in the services
sector.
• Service organizations tend to present themselves to
all stakeholders under a single name and not to
brand individual product lines separately, as is the
norm in many consumer goods companies.

5
• If reputation among employees has a significant
role in shaping its market, then an understanding of
how reputation can be influenced should provide a
useful starting point for managers seeking to
improve performance.

6
Corporate Reputation and Performance

• Strong positive correlations between Fortune

rankings and financial performance were
traditionally argued as proof of the link.
• Employees can also influence the opinions of
members of their private social network leading to
a strong enhancement of corporate reputation by
adopting certain attitudes and behaviors in order to
become a corporate ambassadors safeguarding
corporate reputation and spreading goodwill in
support of the firm.

7
• Which are the Dimensions of Reputation ?

8
 Financial Performance
• This dimension considers the economic situation of the
company, its financial structure and its capacity to pay the
debts and liabilities incurred in ordinary activities.
• Any commercial organization performs financially will
influence its reputation; a loss-making company will be less
well regarded than a profitable one, especially by investors
but also by employees.

9
 Quality of Management
• This dimension refers to ‘the managers' ability to
develop, direct, and control its resources to support the
discharge of its policy and program responsibilities’

• Most cognitive measures of reputation include an

assessment of the quality of a company’s management

10
Human Resources
• Although the label of human resources is not
widely used in measures of reputation, most reflect
the importance of employees in one way or
another. Companies should seek to meet the
expectations of their employees, especially in
labor-intensive service firms.

Business Strategy
• Allied to quality of management, an appraisal of
business strategy is frequently included in
reputation measures.

11
 Employee Stakeholders:
The Workforce In The 21st Century
• The following values were identified as motivators for
professionals:
• Competitive pay
• Benefits and opportunities
• A fair deal
• Being valued
• Decent relationships

12
“Workforce 2000” related values
considered most important include:
• Recognition
• Respect and dignity
• Personal choice
• Involvement at work
• Pride in work
• Quality of lifestyle
• Financial security
• Self-development
• Health and wellness

13
 The Changing Social Contract Between Corporations
and Employees

• The social contract that has historically defined the

employee/employer relationship is known as the
employment-at-will (EAW) doctrine.

• There is largely no concept of at-will employment in

India and employment may only be terminated for
reasonable cause, except for persons in management
positions in certain states. Procedures for termination
of employment vary based on the reason why an
employee is terminated and the category of the
employee.

14
• The EAW remains the cornerstone of U.S. labor
law.
• At issue is the continuing debate over the nature of
property and property rights.

15
 Employee And Employer Rights And
Responsibilities
• The ideal relationship between employer and employees is
one based on mutual respect and trust.
• A right can be understood as a “moral claim.”
• The moral foundation for employee rights is since employees
are persons.
• The evolving social contract between employers and
employees still recognizes employers’ power over physical and
material property, but the contractual relationship aims in
principle at balance, mutual respect, integrity, and fairness.

16
Employee And Employer Rights And
Responsibilities
• Employers are obliged to:
• Pay employees fair wages for work performed
• To provide safe working conditions
• Employees are responsible for:
• Fulfilling their contractual obligations to the corporation
• For following the goals, procedural rules, and work plans
• For performing productively
• Timeliness
• Avoiding absenteeism
• Acting legally and morally
• Respecting the intellectual and property rights of the employer

17
 Employee And Employer Rights And
Responsibilities
Major types of employee rights in the workplace
include:
• Right not to be terminated without just cause
• Right to due process
• Right to privacy
• Right to workplace health and safety
• Right to organize and strike
• Rights regarding plant closings

18
 Employee And Employer Rights And
Responsibilities
• Employees’ right to privacy remains one of the
most debated and controversial rights. Areas
centered around issues of privacy include:
• Technology use
• Polygraph and psychological testing
• Workplace surveillance
• Internet use
• Drug testing
• Genetic discrimination

19
 Discrimination, Equal Employment
Opportunity, And Affirmative Action
• Recently, discrimination has surfaced in several categories
including:
• Racial profiling
• Income disparities
• Ratio of female compensation compared to male
• Examples of discriminatory practices have been found in:
• Recruitment
• Screening
• Promotion
• Termination
• Conditions of employment
• Discharge

20
 Sexual Harassment In The Workplace

• Sexual harassment remains among the most

prominent civil right issues in the workplace.
• Forms of sexual harassment include:
• Unwelcome sexual advances
https://www.youtube.com/watch?v=nNwrPjV3P38
• Coercion
• Favoritism
• Indirect harassment
https://www.youtube.com/watch?v=MjRcjAkb8_4
• Physical conduct
• Visual harassment
https://www.youtube.com/watch?v=uts4F3RHjhM
21
 Whistle-Blowing V/s Organizational
Loyalty
• De George has identified five conditions when whistle-blowing is morally
justified:
• When the product or policy of the firm will serious and considerable harm to
the stakeholders
• When an employee identifies a serious threat of harm stating his/ her moral
concern
• When the immediate supervisor does not act, it should be reported to the
higher authority
• Employee must have adequate documented evidence
• Employee must have valid reasons to believe that such reporting and
resultant action would ensure policy change beneficial to all and is worth
taking the risk as a whistle-blower

22
 Whistle blowing contd…..

• Four managerial steps to prevent external whistle-blowing

have been suggested:
• Develop effective internal grievance procedures and processes
that employees can use to report wrongdoings
• Reward people for using these channels
• Appoint senior executives to address such concerns
• Assess large fines or illegal actions ; include all wrong doers who
knowingly play on / break the rules

23
Six times Indian whistleblowers uncovered scams
and made headlines
• https://www.midday.com/lifestyle/culture/article/s
ix-times-indian-whistleblowers-uncovered-scams-
and-made-headlines-23197139

24
Environmental Ethics
• https://www.youtube.com/watch?v=cG0H07Laadg
Poverty, resource, environment
• Poverty cycle – result of lack of resource
• Overuse of natural resources may cause poverty (e.g.; Phillipines)
• Poverty and environmental deterioration are mutually reinforcing
Is economic growth conducive to the
environment ?
• No contradiction between growth and environment, inherently
• However, a high rate of growth may associate with high rate of
environmental pollution.
Global environment: Some basic issues
• Global climate change
• Ozone layer depletion
• Acid rains
• Noise pollution
• Pollution of international waters
• Deforestation
• Soil erosion, radioactive pollution
• Loss of valuable species
• Loss of biodiversity
In 1991, World Bank, UNDP, UNEP identified four major global environmental issues: biodiversity,
climate change, depletion of the ozone layer, problems of international waters.

Following actions may be taken :

1. To converse the biological diversity and to fairly and equitably share the benefits of genetic
resources
2. To control and reduce the harmful effects of desertification and deforestation
3. To protect an enhance wetlands
4. To converse and rationally use the marine living resources
5. To protect the endangered species of flora and fauna from over-exploitation
6. To conserve and effectively manage migratory species
7. To protect the ozone layer, and, phase out the ozone depleting substances
8. To stabilize the emission of greenhouse gases
9. To prevent the dumping of hazardous waste
10. To regulate the quantity / quality aspects of international waters
Global inequalities in the management of
environmental problems
• Conflict between the interests of DCs & LDCs
• DCs have been given the power to increase the production of CFCs,
under Montreal Protocol.
• LDCs get affected financially to reduce CFC production.
• Polluters must pay !
Climate change and other agents of pollution
• OECD countries generate between 300 and 800 million tons of
hazardous wastes.
• US alone contributes 88% of the above amount.
• Only 10% of the world’s fresh water is polluted in terms of diminished
oxygen content.
Air pollution
Who Report says, each year, more than 2.5 million people die of air-
borne diseases.
For every 1% of loss of ozone, the risk of skin cancer will increase by 6%
(GEO Yearbook, 1997)
Urban areas are more polluted than rural areas.
 Pollution Index 2022

• https://www.numbeo.com/pollution/rankings.jsp
Environmental pollution in India

• Bhopal Gas Tragedy 1984

• India generates USD 1.5 billion worth of e-waste , 30% of which IT
industry contributes.
• Most of the rivers in Gujarat near chemical corridor are polluted
• Adverse effects of endosulfan on the cashew nut plantation in Kerala
and Karnataka
• Maharashtra is the topmost e-waste producing state followed by
Tamil Nadu, Andhra Pradesh, Uttar Pradesh and West Bengal,
Delhi, Karnataka, Gujarat, Madhya Pradesh and Punjab for total
70% of e-wastes production.
Waste composition in Mysuru and Bengaluru
Social cost of pollution

• Pollution is a negative externality. Economists illustrate the

social costs of production with a demand and supply diagram.
The social costs include the private costs of production
incurred by the company and the external costs of
pollution that are passed on to society.
What are the costs of pollution?
• Outdoor air pollution could cause 6 to 9 million premature deaths a
year by 2060 and cost 1% of global GDP – around USD 2.6 trillion
annually – as a result of sick days, medical bills and reduced
agricultural output, unless action is taken, according to a new OECD
report.
 Ethical issues in environmental pollution/ damage

• Negative environmental externalities impose extra cost on the poor people

who are affected by pollution. Negative externalities lead to market failure
because the market mechanism cannot account for them. As a result, market
price does not show the real worth of a commodity. There are misallocation
of resources.
• As most of the poor people depend on forest for the environmental
resources for their livelihood, it is morally unjust to destroy or damage such
resource.
• It is basic human right to enjoy a clean and healthy environment.
Environment pollution creates threat to human health, thus, is unethical.
• Pollution increases cost of production (if the social cost is included) and
reduces the output. Both are socially undesirable.

• Many a times, polluters exploit the loopholes in the system and

regulatory capture.

• Environment pollution occurs due to overuse of natural resource.

• Environment pollution creates threat to our next generation

• Environment pollution poses threat to ecological balance

• Environment pollution leads to hedonic injustice by distorting the prices

of land, houses, and other habitats.
Management of environment pollution
• Corrective Pigouvian tax may be imposed by the government on the polluter
• What is a Pigouvian Tax?

• It is a special category of taxes levied to neutralize negative externalities such as

social costs of transactions. This is not a tax hike that can generate significant
additional revenues for the government.

• Government regulation may be resorted in 2 cases:

(i) to impose the correct dose of taxation on the polluter and

(ii) merger of polluting firms and the victimized firms
 Examples of Pigouvian tax
Examples of Pigouvian Tax
In India, coal cess or clean environment cess can be regarded as an example of Pigouvian tax.
It is levied by France as a noise tax on aeroplanes at its nine busiest airports.

• A carbon tax is imposed by more than 40 countries on corporations that burn coal, oil, or gas and which produce
greenhouse gas emissions.
• The Netherlands imposed a groundwater tax on drinking water companies in order to preserve clean drinking water
for future generations.
• In Europe, a tax on plastic and paper bags was imposed to encourage consumers to bring their own reusable bags
from home to deter the use of plastic and paper.
The trade-off between environmental quality and growth

• The negative impact of a restrictive environmental policy on

economic growth stems from the additional costs that it imposes on
the production sector.

• The pursued improvement in environmental quality requires a

permanent reduction in the flow of polluting emissions, one of the
implicit or explicit inputs of the production process.
• In countries such as Costa Rica, Malawi, Mali, and Mexico the
soil losses approximate . 5-1.5% of gross domestic product
annually. Progress has been made in water purification, but
there are still nearly 1 million people in the developing world
without access to clean water for drinking and bathing.
• Class discussion

• Most theories which try to account for the positive impact of

restrictive environmental policy on economic growth assume that
environmental quality generates external effects which enhance
productivity, either directly within the production sector, or indirectly
in the core sector driving the growth process.

• Agree/Disagree. Justify
Class participation is must.

Name Environmentally friendly steps by INDIA

Individual Contributions from each of you

COUNTRIES MOST AFFECTED BY CLIMATE CHANGE
• JAPAN (Climate Risk Index: 5.5)
• PHILIPPINES (Climate Risk Index: 11.17)
• GERMANY (Climate Risk Index: 13.83)
• MADAGASCAR (Climate Risk Index: 15.83)
• INDIA (Climate Risk Index: 18.17)
• SRI LANKA (Climate Risk Index: 19)
• KENYA (Climate Risk Index: 19.67)
 Topic-1
Environmental forces and stakeholders

Dr.Mamta Hegde
Stakeholder Theory

• Companies do not operate in a vacuum. They are influenced by

stakeholders in various way

• Stakeholder relationships have been investigated with respect to goal

setting and strategic management governance issues, goal conflicts and
asset management, as well as with respect to social issues and
environmental responsibility

• Stakeholder theory implicitly adopts the network perspective. Networks of

linkages with stakeholders can promote or obstruct corporate goal
achievement in different business areas
Primary and secondary stakeholder
• Referring to the level of importance of the different groups for
corporate goal attainment.

• relationship with primary groups is of vital importance for the

continuity of a company. Secondary stakeholder groups only exercise
influence, such as inhabitants living in the neighborhood of
companies and environmental organizations
Sustainable Business Development
• The concept of sustainable business development has a normative
component in it. It means that an enterprise should not only satisfy
the needs of present stakeholder groups, but do so without sacrificing
the interests of future generations.
Opening Case
Blogger: “Hi. I download music and movies, LimeWire, torrent [and
other sites]. Is it illegal for me to download or is it just illegal for the
person uploading it. Does anyone know someone who was caught
and got into trouble for it, what happened to them. Personally, I don’t
see a difference between downloading a song or taping it on a cassette
from a radio!”
• Today, more than ever, the traditional boundaries between politics,
culture, technology, finance, national security, and ecology are
disappearing.

• These large macro-level issues taken together underlie many ethical

dilemmas that affect business and individual decisions among
stakeholders in organizations, professions, as well as individual lives.

https://www.livemint.com/companies/news/with-60-stake-l-t-completes-its-hostile-takeover-of-mindtree-
1561536743325.html
Will robots, robotics, and artificial intelligence (AI) applications replace
humans in the workplace?
This interesting but disruptive development poses concerns. “The outsourcing of
human jobs as a side effect of globalization has arguably contributed to the current
unemployment crisis. However, one rather extreme trend sees humans done away
with altogether, even in the low-wage countries where many American jobs have
landed.” What will be the ethical implications of the next wave of AI development,
“where full-blown autonomous self-learning systems take us into the realm of
science fiction—delivery systems and self-driving vehicles alone could change day-to-
day life as we know it, not to mention the social implications.
AI also extends into electronic warfare (drones), education (robot
assisted or led), and manufacturing (a Taiwanese company replaced a
“human force of 1.2 million people with 1 million robots to make
laptops, mobile devices, and other electronics hardware for Apple,
Hewlett-Packard, Dell, and Sony”).

One futurist predicted that as many as 50 million jobs could be lost to

machines by 2030, and even 50 percent of all human jobs by 2040.
These, again, may be extreme views
Some Key Findings from the Ethics and Compliance
Initiative (ECI)

• One in every five employees feels pressure to compromise their

organization’s ethics standards, policies, or the law.
• Employees who feel pressure are about twice as likely to observe
various types of misconduct.
• The incidence of pressure was three times as high for employees with
weak leader commitment to organizational values and ethical
leadership compared with strong leader commitment.
Debate Issue-Take a Stand
Does Being Ethical Result in Better Performance?
While research suggests ethical businesses have better performance, there is also an alternate view. Many
businesspeople think ethics and social responsibility require resources that do not contribute to profits, and
time spent in ethics training could be better used for other business activities. One viewpoint is that when
companies push the edge, pay minor fines for misconduct, or are not caught in wrongdoing, they may end up
being more profitable than companies with a strong ethical culture. Many financial companies became
extremely profitable when taking high-risk opportunities with limited transparency about the nature of the
complex products they sold. To gain competitive advantage, a firm needs to be able to reach markets and make
sales. If a firm is too ethical, it might lose competitive advantages. On the other hand, Ethisphere’s World’s
Most Ethical Companies index indicates ethical companies have better financial performance.

1. Ethical businesses are the most profitable.

2. The most ethical businesses are not the most profitable.

Implementing
a stakeholder
perspective
Step-1 Assessing the corporate
culture
 Step 1: Assessing the Corporate
Culture
• A social responsibility program must align with the
corporate culture of the organization. tep 1: Assessing the
Corporate Culture
• The purpose of this first step is to identify the organizational
mission, values, and norms that are likely to have
implications for social responsibility
 Step 2: Identifying Stakeholder Groups

1.In managing this stage, it is important to recognize stakeholder

needs, wants, and desire.

2. Many important issues gain visibility because key constituencies

such as consumer group regulators, or the media express an
interest.
• A proper assessment of the power held by a given
stakeholder community includes an evaluation of the
extent to which that community collaborate with others to
pressure the firm.

• For example, most consumers of shoes do not need to buy

Nike shoes. Therefore, if they decide to boycott Nike, they
endure only minor inconveniences. Nevertheless, consumer
loyalty to Nike is vital to the continued success of the sport
apparel giant.
 • Together, steps 1 and 2 lead to the
identification of the stakeholders who are
Step 3: both most powerful and the most legitimate.
Identifying
• Conditions for collaboration exist when
Stakeholder problems are so complex that multiple
Issues stakeholders required to resolve the issue,
and adversarial approaches to problem
solving are clearly inadequate
Step 4: Assessing Organizational Commitment to Stakeholders
and Social Responsibility
• Step 4 brings the three stages together to arrive at an understanding
of social responsibility that specifically matches the organization of
interest.
• This general definition will then be used to evaluate current practices
and to select concrete social responsibility initiatives.
Firms such as Starbucks selected activities that address stakeholder concerns. Starbucks formalized its

initiatives in official documents such as annual reports, web pages, and company brochures.

Starbucks is concerned with the environment and integrates policies and programs throughout all

aspects of its operations to minimize its environmental impact.

The company also has many community-building programs that help it to be a good neighbor and

contribute positively to the communities where its partners and customers live, work, and play. It has

been found that social responsibility disclosures in company annual reports are directly related to the

quality of corporate governance. Therefore, transparency in reporting social responsibility

commitment is important for top company officers and the board of directors.
Step 5: Identifying Resources and Determining
Urgency

• The prioritization of stakeholders and issues and the assessment of

past performance lead to the allocation of resources.
• Two main criteria can be considered:
1.The level of financial and organizational investments required by
different actions and the urgency when prioritizing social
responsibility challenge.
2. When the challenge under consideration is viewed as significant and
stakeholder pressures on the issue can be expected, the challenge is
considered urgent.
Example: step-5

Apple found itself grappling with an urgent challenge with its batteries when it was

discovered that the company intentionally throttled old iPhone models in order to
prevent issues with older batteries. To appease disgruntled stakeholders, Apple
discounted iPhone battery replacements for select models and released
educational content about how to maximize battery performance and prevent
unexpected shutdowns. Apple iOS 11.3 included a new Battery Health feature that
provides data on charge level over time, average screen on and off times, battery
usage by app, and maximum battery capacity
Step 6: Gaining Stakeholder Feedback
Stakeholder feedback is generated through a variety of means. First,
stakeholders’ general assessment of a firm and its practices can be
obtained through satisfaction or reputation surveys.
Second, to gauge stakeholders’ perceptions of a firm’s contributions to
specific issues, stakeholder-generated media such as blogs, websites,
podcasts, and newsletters can be assessed. Many firms use media-
tracking services to identify and classify content related to the
company.
Third, more formal research may be conducted using focus groups,
observation, and surveys. Many watchdog groups use the web to
inform consumers and publicize
their messages.
Example: Step 6
• Consumer Watchdog, a California-based group that keeps an eye on
everything from education to the oil industry, filed a lawsuit against health
insurer Aetna claiming discrimination against patients with HIV.

• The group claims that under a new policy, Aetna began requiring patients
with HIV to obtain their medications solely from their mail-order pharmacy
without having a chance to opt out. Aetna claims its move is consistent
with industry standards and that members could opt out of the policy.
This illustrates the impact of secondary stakeholders as a special interest
group.
Identify stakeholder ethics and moral responsibilities

• Utilitarianism – weighing costs and benefits ; ends justifying means

• universalism – showing respect and concern for others; means count as much as ends
• Rights – recognize individual liberties and privileges under law and constitution
• Justice – Observing the distribution of burden and benefits of all concerned
• Voluntarily – acting freely and from one’s own accord

25
 Develop specific strategies and tactics

Stakeholder’s potential for threat to organization

High Low

cooperation with organization

Stakeholder’s potential for

Type 4 Type 1
Mixed blessing Supportive
High
Strategy: Collaborate Strategy:
Involve

Type 3 Type 2
Low Non-supportive Marginal

Strategy: Strategy:
Defend Monitor
Ref-nxt. slide 26
• Strategy 1&2:Reliance industries -Passing responsibilities to next
generation

• Strategy 3:Tata Vs Cyrus Mistry

• Strategy 4:Mahindra Renault, Starbucks and Tata

 Monitor shifting coalitions

• CEO needs to monitor the evolution of issues and actions of stakeholder

• Tracking external trends and events and the resultant stakeholder’s strategies to react
accordingly
• As moral agents, companies are required to obey the laws and regulations that define
acceptable business conduct.
• Companies are more than the sum of their parts or participants. Because corporations
are chartered as citizens of a state and/or nation, they generally have the same rights
and responsibilities as individuals.

28
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?

29
Moral Responsibilities Of Functional Area
Professionals
• One goal of a stakeholder analysis is to encourage and
prepare organizational managers to articulate their own
moral responsibility, as well as the responsibilities of the
company and their profession, toward their different
constituencies.
• Stakeholder analysis focuses the enterprise’s attention
and moral decision-making process on external events.
• This approach applies internally, especially to individual
managers in and across traditional function areas.

30
 Issues Management Approaches-
Before crisis
• 4-Stage Issue Life Cycle Approach
• Thomas Marx observed that issues evolve from social expectations to social control
through the following steps:
• Social expectations
• Social discussions and debate
• Interest group attention
• Political issues
• Media attention
• Legislation initiated
• Hearings held
• Legislative engagement
• Law passed
• Legal involvement
• Regulation enacted
• Social control & litigation
• Compliance issues
• Legal conflict
• Court rulings
https://www.lifecycleinitiative.org/starting-life-cycle-thinking/benefits/
31
 Crisis Management Approach-
after crisis
• Crisis management: The process of handling a high-impact event
characterized by ambiguity and the need for swift action to
access and respond to potential damage

• https://economictimes.indiatimes.com/tech/technology/what-
if-musk-loses-the-twitter-case-but-defies-the-
court/articleshow/94616143.cms?from=mdr

32
First Approach: Pre-crisis Through Resolution

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

• Prodromal (pre-crisis) stage
• Warning symptom
• Acute stage (crisis occurs)
• Point of no return
• Chronic stage (lingering)
• Self-doubt and self-analysis phase
• Resolved stage (health restored)
• Return to normalcy
Crisis Management recommendations

• Suggestions that corporations can follow to respond

more effectively to crises include:
• Face the problem
• Take your lumps
• Recognize that there is no such thing as a secret or
private crisis
• Stage war games
• Use the firm’s philosophy, motto, or mission statement
• Use the firm’s closeness to customers and end users for
early feedback

34
STAKEHOLDER
APPROACH IN
ISSUE
MANAGEMENT

Dr. Mamta Hegde

BEGSR 2

ISSUES MANAGEMENT
“The strategic use of issue analysis and strategic
responses to help organizations make adaptations
needed to achieve harmony and foster mutual
interests with the communities in which they
operate”
• Adopting anticipatory management
strategies gives organizations a
competitive advantage.
• What is an anticipatory management
strategy?
 3

Anticipatory Risk Management:

A permanent orientation toward understanding and

embracing future risk, generating mitigation strategies to

address those risks, and integrating them into the planning,

operation, and risk management functions of a business.

https://en.wikipedia.org/wiki/Quench_the_Spark
 EACH TYPE OF
NEGOTIATION
FALLS INTO ONE OF
TWO CATEGORIES.
 5

DISTRIBUTIVE NEGOTIATION
• Distributive negotiation, sometimes called zero-sum
negotiation or win-lose negotiation, is a bargaining
approach in which one person succeeds only if another
person loses.
• A distributive negotiation usually involves a discussion
of a single issue.
 6

EG: DISTRIBUTIVE NEGOTIATION

• A sales business wants to enter a contract with a vendor for IT

services. The business wants the most IT services for the
lowest price possible, while the IT vendor intends to provide
the lowest number of resources for the highest price. Each
party's desire to get a better deal represents a distributive
negotiation approach.
 7

Tips for success in a distributive negotiation

• Be persistent:
Persistence and polite assertiveness can help you fulfill your interests.

• Make the first offer

Make the first offer to begin the bargaining in your favor.

• Don't communicate your minimum favorable outcome

It's important to aim high in distributive negotiations to ensure successful

bargaining. One can withhold any information on the minimum willingness to
accept from bargaining for the best.
 8

INTEGRATIVE NEGOTIATION

Integrative negotiation, sometimes called win-win or collaborative

negotiation, is a bargaining approach where negotiating parties
attempt to reach a mutually beneficial solution.

• Unlike distributive negotiations, integrative negotiations can

involve multiple issues.
 9

FEW TIPS TO USE IN AN INTEGRATIVE NEGOTIATION:

• Take a principled approach. principles can discuss during an integrative negotiation to build trust with
the other party.

• Discuss your needs and interests openly. Communicating your goals in an integrative negotiation can
promote transparency and a positive relationship.

• Use bargaining to solve problems. In integrative negotiation, both parties can use negotiations as an
opportunity for collaborative problem-solving.
 PRIORITIZATION OF ISSUES 10

Not all issues deserve equal treatment. Doing so might swamp down the organization. Based on the
analysis, an organization can prioritize challenging issues and allocate resources accordingly

Impact-urgency classification
 IMPACT-URGENCY CLASSIFICATION
11

• Using an impact factor measure, issues can then be ranked as either ‘low
impact’, ‘medium impact’ or ‘high impact’.
• Using the probability factor(ratio between the pre-exponential factor and
the collision frequency), one can then allocate urgency, that is, the
urgency with which an organization must address the issue.
• Issues can then be allocated to ‘low urgency’, ‘medium urgency’ or ‘high
urgency’.
• Issues with high urgency and high impact will therefore be allocated to
high-priority issues, while those with low urgency and low impact will be
classified in the low-priority category.
• The pre-exponential factor is also known as the frequency factor and represents the frequency of
collisions between reactant molecules at a standard concentration.
 STAKEHOLDER ENGAGEMENT 12

• The development of action plans for how each prioritized issue will
be handled, and how concerned constituencies will be engaged.

• Understanding stakeholder expectations, motives and their primary

concerns is crucial for the leveraging of appropriate
communication.

• An issue can concern an entirely new audience (i.e. peripheral

stakeholders) that an organization has never interacted with. An
organization should therefore anticipate some communication
challenges.
• Ref: Liz Truss case
 13

• Communication measures can be based on the following assessments:

• What stakeholder group do we wish to engage?

• How involved are they in the issue—actively, passively, consciously and

so on? What are the target audience information needs?

• What are the target audience preferences for information channel and
language skills?
 STAKEHOLDER VOICES IN SOCIAL MEDIA 14

• Stakeholders use social media to connect with each other and

collectively raise issues against organizations.

• Organizations see potential in social media campaigns, either to promote

brands or stimulate stakeholder engagement.

However, these can backfire.

• For example, in 2012, McDonald’s tried to invite its followers to share stories
about their dining experiences through the hashtag #McDStories. The
company was possibly expecting positive stories about its ‘happy meals’, but
instead it was swamped by negative comments highlighting poor practices,
unsanitary conditions, obesity risks and so on. McDonald’s had no option but
to cancel the campaign within two hours.
 15

• In 2013, American bank JP Morgan Chase & Company asked its followers to ask
questions to an executive using the hashtag #AskJPM. This was at the time the bank
was facing a number of issues, including bribery accusations in Asia and mortgage
bond probes in the USA. The call for questions provoked jeers and sarcastic comments
from its Twitter followers. The bank was forced to cancel its planned live Q&A.
• Customer grievances through social media illustrate the empowerment of
16

the stakeholders and their ability to raise issues against organizations.

• Complaintvertising is a trend started in 2013 to enable individuals to

buy prominent advertising space on Twitter and Facebook in order to
air their grievances. This trend provides avenues for aggrieved
stakeholders to voice their complaints.
• For example, Hasan Syed, an American entrepreneur travelling with
his father on a British Airways flight to Paris, got annoyed when the
airline lost his father’s luggage and failed to respond to his complaint
on Twitter. Syed spent more than $1000 on the ad platform to post a
promoted tweet reading “Don’t fly @British_Airways. Their customer
service is horrendous.” The tweet was seen by more than 50,000
Twitter users in the UK and in the USA
 17

• With the increasing use of social media, organizations can engage in proactive crisis
management by monitoring issues raised by various stakeholders in social media.
Monitoring conversations in social media can help the organization understand public
opinion concerning its business, brands or activities.

• The same social media that allows clients to share their experiences is the
same medium managers can use to engage with stakeholders, manage
reputation, bond with existing customers and reach out to new customers.
 18

• Dealing with issues in the social media arena should be done in such a way that the
response does not create new mini-crises.

• Key objectives of issues management will thus be aimed at identifying emerging

trends, concerns and issues, managing the response to issues, responding to issues
raised by key stakeholders and harmonizing an organization’s interest with that of its
stakeholders. Stakeholder communications allow for a two-way flow of information
around the issues at stake.