CHAPTER TWO

Stakeholder And Issues

Management Approaches
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 Chapter Topics
1. Why use a stakeholder management approach for business ethics?
2. Stakeholder management approach defined
3. How to execute a stakeholder analysis
4. Stakeholder approach and ethical reasoning
5. Moral responsibilities of functional area professionals
6. Three issues management approaches
7. Two crisis management approaches

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 Why should we use Stakeholder
Management Approach for Business
Ethics?

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 Why Use A Stakeholder Management Approach
For Business Ethics?

◦ The stakeholder approach argues that corporations should treat all their
constituencies fairly and that doing so can enable the companies to
perform better in the marketplace.

◦ “If organizations want to be effective, they will pay attention to all and
only those relationships that can affect or be affected by the achievement
of the organization’s purposes.”

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 Why Use A Stakeholder Management Approach
For Business Ethics?
◦ The stakeholder approach is a response to the growth and complexity of
understanding and study of the modern corporation and its influence on
the environment.
◦ The ethical dimension of this approach is based on the view that:
◦ Profit maximization is constrained by justice
◦ Regard for individual rights should be extended to all constituencies that
have a stake in the affairs of a business
◦ Organizations are not simply or only economic in nature but can and do act
in socially responsible ways, not only because it is the right thing to do, but
also to ensure their legitimacy
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 Stakeholder Management Approach: Criticisms
and Responses

◦ Negates and weakens fiduciary duties managers owe to stockholders

◦ Weakens the influence and power of stakeholder groups
◦ Weakens the Firm
◦ Changes the long-term character of the capitalist system
◦ Rightist Critique

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 Stakeholder Management Approach
Defined
◦ The stakeholder approach provides a framework that enables
users to map and ideally, manage the corporation’s relationships,
both present and potential, with groups to reach win-win
collaborative outcomes.
◦ It does not have to result from a crisis or controversial situation.
◦ It can be used as a planning method to anticipate and facilitate
business decisions, events, and policy outcomes.
◦ Business units, teams, and groups can use this approach.

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 Stakeholder Management Approach
Defined
◦ Stakeholder: any individual or group who can affect or is affected by
the actions, decisions, policies, practices, or goals of the organization.
◦ Primary stakeholders of a firm: owners, customers, employees, and
suppliers.
◦ Secondary stakeholders: all other interested groups such as the media,
consumers, lobbyists, courts, governments, competitors, the public, and
society.
◦ Stakes: any interest, share, or claim that a group or individual has in
the outcome of a corporation’s policies, procedures, or action toward
others.
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How to Execute A Stakeholder
Analysis

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 How To Execute A Stakeholder
Analysis
◦ The stakeholder approach is a pragmatic way of identifying and
understanding multiple, often competing, political, social, legal,
economic, and moral claims of many constituencies.

◦ The stakeholder analysis is a series of steps.

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 How To Execute A Stakeholder
Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

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 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

13
 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

15
 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

16
17
 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

18
 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

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21
 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

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 How To Execute A Stakeholder Analysis

1. Map stakeholder relationships.

2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s interest.
4. Assess the nature of each stakeholder’s power.
5. Construct a matrix of stakeholder moral responsibilities.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.

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 From the point of view of the focal stakeholder, while you as
CEO are developing specific strategies, keep the following points
in mind:

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Negotiation Methods:
Resolving Stakeholder
Disputes

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Stakeholder Dispute Resolution Methods
Stakeholder Approach and
Ethical Reasoning

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 Stakeholder Approach And Ethical
Reasoning
◦ The stakeholder analysis is an analytical method where no prescribed
ethical principles or responsibility rules are built-in.

◦ Ethical reasoning in the stakeholder analysis means asking:

◦ What is equitable, just, fair, and good for those who affect and are
affected by business decisions?
◦ Who are the weaker stakeholders in terms of power and influence?
◦ Who can, who will, and who should help weaker stakeholders make their
voices heard and encourage their participation in the decision process
and outcomes?

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Moral Responsibilities of
Cross-Functional Area
Professionals

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

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Moral Responsibilities Of Functional Area
Professionals

◦ Traditional functional and expert areas include:

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

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Issues Management, Stakeholder Approach, and
Ethics: Integrating Frameworks

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Issues Management, Stakeholder Approach, and
Ethics: Integrating Frameworks

O - What is a Public Issue

O - Stakeholder and Issues Management:

Connecting the Dots

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Three Issues Management Approaches
◦ First Approach: 6-Step Issue Management Process
◦ Most straightforward
◦ More appropriate for companies or groups trying to
understand, manage, and control their internal environments
◦ Involves the following steps:
◦ Environmental scanning and issues identification
◦ Issues analysis
◦ Issues ranking and prioritizing
◦ Issues resolution strategizing
◦ Issues response and implementation
◦ Issues evaluation and monitoring
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 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
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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 41
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Managing Crisis

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 Two Crisis Management Approaches
◦ First Approach: Precrisis Through Resolution
◦ According to this model, a crisis consists of four stages:
◦ Prodromal (precrisis)
◦ Warning stage
◦ Acute
◦ Damage has been done
◦ Chronic
◦ Clean-up phase
◦ Resolved
◦ The crisis management goal
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 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
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47
Crisis Management
Recommendations

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 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 firm’s philosophy, motto, or mission statement
◦ Use the firm’s closeness to customers and end users for early feedback

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 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 firm’s culture
◦ Output, instead of process, is the focus

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