Chapter Two

Stakeholder And Issues

Management
Approaches

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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
 Microsoft case Mattell Toy case

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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.

 Trust , trustworthiness, cooperativeness- ethical principles

 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
 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 stakeholder’s interest
 Assessing the nature of each stakeholder’s power
 Constructing a matrix of stakeholder moral
responsibilities
 Developing specific strategies and tactics
 Monitoring shifting coalitions
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 Mapping stakeholder relationships

 Who are our stakeholders, currently

 Who are our potential stakeholders
 How does each stakeholder affect us
 How do we affect each stakeholder
 For each division, and business, who are the stakeholders
 What assumptions does our current strategy make about each
important stakeholder (at each level)
 What are the current ‘environmental variables’ that affect us and our
stakeholders [initiation, GNP, prime rate, confidence in business (from
polls), corporate identity, media image etc)
 How do we measure each of these variable and their impact on us and
our stakeholders
 How do we keep score with our stakeholders

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 Map stakeholder coalition

 Coalitions among stakeholders from around stakes that they

have or seek to have in common
 Interest groups and lobbies may join forces against the
common enemies
 Mapping actual and potential coalitions around issues help CEO
anticipate and design strategic responses towards these groups
before or after they form

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Assess the nature of each stakeholder’s
interest

 Four different types of stakeholders may be faced by a

company:
 Supportive & Non-supportive – are with and against the company
 Mixed blessing & Marginal – less sure about their support for the company’s
strategy
 Non-supportive stakeholders may seek to prevent, disrupt, or
attack company’s strategies and may include the government,
consumers, competitors, and the media
 Systematic auditing required to get a clear picture of the players
and their interests, the situation of the firm, to assess the
nature of each stakeholder’s interest

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Assess the nature of each stakeholder’s
power
 What is in it for each stakeholder
 Who stands to win, lose, or draw over certain stakes
 Eight types of power :
 Voting power
 Political power (influence decision making)
 Economic power (control over resources)
 Technological power
 Legal power
 Environmental power
 Culture power
 Power over individuals and groups (through persuasion)

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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

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 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
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

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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
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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 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

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 Crisis Management
Approach- after crisis
 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
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 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

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