BUSINESS ETHICS

Chapter # 2

Stakeholder & Issue Management Approaches

Stakeholder management Stakeholder management approach definedapproach defined

The stakeholder approach provides a framework that enables users to map and ideally manage the corporation’s relationships (present and potential) with groups to reach win-win collaborative outcomes.

Why use a stakeholder Why use a stakeholder management approach for management approach for

business ethicsbusiness ethics

The stakeholder approach is a response to the growth and complexity of corporation and understand how the corporation operate with their stakeholders and stockholders.

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 purpose.

The Stake holder's The Stake holder's welfarewelfare: :

This approach is based upon the view of profit maximization is achieved by justice.

To respect and fulfill these stake holder's rights.

To act in the best interests of and for the benefit of their customers employees suppliers and stockholders.

How to execute a How to execute a stakeholder analysisstakeholder analysis

The stakeholder analysis is a systematic way of identifying & understanding of activities in an organization and evaluation of their impact on its operations.

It is a method to help understand the relationships between an organization and the groups with which it must interact.

Steps for Stakeholder Steps for Stakeholder analysisanalysisMap stakeholder relationships

In this step the management have to answer the following questions :

1.Who are our stakeholders currently ?2.Who are our potential stakeholders ?3.How does each stakeholder effect

us ?4.How do we effect each stakeholder ?

Map stakeholder Map stakeholder coalitions coalitions

After you identify and make a map of the stakeholders who are directly and indirectly involved with your firm

The next step is to determine and map any coalitions that have formed.

Coalition among and between stakeholder form issues and stakes; that they have or seek to have in common.

Competitors also may join forces if they see an advantage in numbers.

Assess the nature of Assess the nature of each stake holder’s each stake holder’s

interest interest This step is assessing the nature

of each stake holder's power.Supportive Stakeholder: They

are with the company.Non-supportive stakeholder:

They are against the company.Mixed Blessing & Marginal stakeholder: Management is less sure about their support for organization strategy.

Assess the nature of each Assess the nature of each stakeholder’s power stakeholder’s power

This part of analysis asks, what's in it for each stakeholder? Who stands to win, lose or draw over certain stakes?

Three types of power stakeholders you can use are those with.

Voting PowerPolitical PowerEconomic Power

Voting power: owners and stakeholders can vote there choices to affect the firm decisions.

Political power: federal, state, and local government can exercise their political power by joining the on going lawsuits or by originating the new ones.

Economic power: consumer can exercise their economic power by boycotting the company's product or buying and using products of other firms.

Constructing a matrix of Constructing a matrix of stakeholder moral stakeholder moral responsibilities responsibilities

After you map stakeholder relationships and coalitions and assess nature of each stake holder's interest and power, the next step is to determine the ethics, responsibilities, and moral obligations your company has to each stakeholder.

Matrixes of stakeholder responsibility consist of, legal, economic, ethical, and voluntary.

Economic responsibility: Economic responsibility to the owners (as stakeholders) as preventing as many costly lawsuits as possible.

Legal responsibility: The legal responsibility is to negotiating disputes outside the courts. Legal requirements to carry out business activities must be fully followed.

Ethical responsibility: The company's ethical thinking and strategies to show responsibility towards all stakeholders. For example : justice etc

Voluntary responsibility: The CEO may advise shareholders to show responsibility by the publicly announcing their plans and marketing and distribution of products.

Developing specific Developing specific strategies and tactics strategies and tactics

Using your results from the preceding steps, you can now proceed to outline the specific strategies and tactics you wish to use with each stakeholder.

First, you should consider whether to approach each stakeholder directly or indirectly.

Second, you need to decide whether to do nothing, monitor, or take offensive position with certain stakeholders.

Third, you should determine whether to negotiate, avoid or wait and see with specific stakeholders.

Finally, you should decide what combination of strategies you want to employ with each stakeholder.

Type 1, supportive: Stakeholder with low potential for the threat and high potential for cooperation. Here the strategy of the focal company is to involve.

Type 2, non supportive: who show high potential to the threat and low potential to cooperation. The focal strategy is to defend its interest and reduce dependence on that stakeholder.

Type 3, mixed blessing: with high potential for both threat and cooperation. This stakeholder calls collaborative strategy.

Type 4, marginal: the stakeholder has low potential for both threat and cooperation. Such stakeholder may not be interested in the issues of concern. The recommended strategy in this situation is to monitor the stakeholder.

Monitoring shifting Monitoring shifting coalitions coalitions

Because time and events can change the stake and stake holders, you need to monitor the evolution of the issues and actions of the stakeholders.

Moral responsibilities of Moral responsibilities of cross functional area cross functional area

professionals 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 their company towards their different constituencies.

Stakeholder analysis focuses the enterprise’s attention and moral decision making process on external events.

Marketing and sales Marketing and sales professionals and mangers professionals and mangers

as stakeholders as stakeholders Sales professionals and

managers are continuously engaged with customers & suppliers.

They also evaluate the market and submit daily, weekly and monthly reports to management.

They must be fair and keep their responsibilities effectively.

R & D Engineering R & D Engineering professionals and mangers professionals and mangers

as stakeholders as stakeholders R &D managers and engineers are

responsible for the safety and reliability of product design.

Faulty products can mean public outcry, which can result in increased public attention unwanted media exposure and possibly perhaps justifiably lawsuits.

Public relations managers Public relations managers as stakeholders as stakeholders

PR managers are responsible for getting information about employees, products, services and the company.

PR managers must convert negative image about the company into positive.

Human resource managers Human resource managers as stakeholder as stakeholder

Human resource mangers (HRM) are on the frontline of helping other mangers to recruit, hire, fire, promote and counsel employees.

Three issues management Three issues management approaches & two crisis approaches & two crisis managementmanagement methodsmethods

Most national and international business- related crisis are evolves due to a single issue.

Three general issues frameworks and two crisis management methods are used to mapping and managing issues before and even after they become crisis for companies.

First approach 6 step First approach 6 step issue management issue management

process process This approach is most appropriate

for companies to understand & manage their internal environment.

This approach includes :

1.Environmental scanning and issues identification

2.Issues analysis3.Issues ranking 4.Issues resolution strategizing5.Issues response and

implementation 6.Issues evaluation and monitoring

Second approach 7 Second approach 7 phase issue development phase issue development

process process A felt need arises from emerging events.

Media coverage is developed.Interest group development gains

momentum and grows. Policies are adopted by leading political

jurisdictions.The federal government gives attention

to the issue hearings and studies.Issues and policies evolve into

legislation and regulation.Issues and policies enter litigation (to

engage in legal proceeding/lawsuit)

Third approach 4-stage Third approach 4-stage issue life cycle issue life cycle

Thomas Marx who offered a four stage issue life cycle. Marx observed that issues evolve from social expectations to social control through the following steps.

Social expectations Political issues Legislation Social Control

Two crisis management Two crisis management approaches approaches

Crisis management methods have evolved from the study of how corporations responded to crises.

The following two approaches map and describe way that organizations can respond to crises.

First approach pre-crisis through resolution

Second approach reaction through accommodation

First approach pre-crisis First approach pre-crisis through resolution through resolution

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

1.Prodromal (Precrisis): warning stage. Organization should carefully observe situation.

2.Acute stage (Crisis occurs): Damage has been done.

3.Chronic stage (Recovery period): Clean up phase. Self analysis, audit & investigation is done in it.

4.Conflict resolution stage (Return to normalcy): It is the crisis management goal.

Second approach reaction Second approach reaction through accommodation through accommodation

Reaction stage: Crisis has occurred, and management lacks the information and time to analyze the event.

Defense stage: The firm’s image is at stake. Company is under big media pressure.

Insight stage: Is the most agonizing time for the firm in controversy. The firm existence is at risk.

Accommodation stage: The company either acts to remove the product from the market or refuse to accept the charges against the product safety.

Agency stage: Company attempt to understand the causes and develop the wale fare program for the public.