Business Ethics Ch 1-3

The Role of Social Media in Stakeholder Engagement

- Address public issues and engage stakeholders. - Identify and solve problems faster. - Share information better among their employees and partners. - Bring customers' ideas for new product designs to market earlier. - Platforms to engage with multiple stakeholders, communication has become faster and more effective.

Eight Strategic Radar Screens

-Customer environment -Competitor environment -Economic environment -Technological environment -Social environment -Political environment -Legal environment -Geophysical environment

The Issue Management Process

1. Identify Issue 2. Analyze Issue 3. Generate Options 4. Take Action 5. Evaluate Results

Environmental Analysis

A method managers use to gather information about external issues and trends to develop an organizational strategy that minimizes threats and takes advantage of new opportunities

Stakeholder Expectations

A mixture of people's opinions, attitudes, and beliefs about what constitutes reasonable business behavior

Stakeholder Materiality

Adaption of an accounting term to prioritize the relevance of the stakeholders and their issues to the company

Stakeholder Networks

Addressing public issues by working collaboratively with other businesses, concerned persons and organizations in stakeholder networks ex. Nike

Identify Issue

Anticipating emerging concerns, or "horizon" issues

Public Issue

Any issue that is of mutual concern to an organization and one or more of its stakeholders

External Stakeholders

Are NOT employed by the firm Suppliers, society, government, creditors, shareholders, customers May have important transactions with the firm, but are not on its payroll

Internal Stakeholders

Are employed by the firm; Employees, managers Work "inside" the firm and contribute their effort and skill to everyday operations

Engagement

Both the company and its stakeholder both have: - an urgent and important goal - the motivation to participate - the organizational capacity to engage with one another

Ownership Purpose vs Stakeholder Purpose

Both theories define the purpose of business differently

Stakeholder Dialogue

Business and its Stakeholders come to face-to-face conversation Core interests and concerns, common definition of a problem Understandings and concerns of all parties Invent innovative solutions and implement them

Boundary-Spanning Departments

Center: Corporation Surrounding: Customers, Community, NGO's, Suppliers, General Public, Environment, Employees, Government, Shareholders

Six dynamic forces powerfully shape business and society relationships

Changing societal expectations Growing emphasis on ethical reasoning and actions Globalization Evolving government regulations and business response Dynamic natural environment Explosion of new technology and innovation

Nonmarket Stakeholders

Community, government, business support groups, etc People or groups who - although they do not engage in direct economic exchange with the firm - are affected by or can affect its actions

Reactive

Companies act only when forced to do so, and then in a defensive manner

Interactive

Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust

Inactive

Companies ignore stakeholder concerns

Proactive

Companies try to anticipate stakeholder concerns

Drivers of Stakeholder Engagement

Company Goal - To improve corporate reputation; to earn a license to operate; to win approval of society Company Motivation - Needs stakeholder involvement because of their expertise or control of critical resources Company Organizational Capacity - Top leaders committed to engagement well-funded department of external (stakeholder) affairs Stakeholders Goal - To change corporate behavior on an issue of concern Stakeholder Motivation - Governmental campaigns, protest perceived as inadequate to change corporate behavior Stakeholder Organizational Capacity - Experiences staff, core group of activists committed to dialogue with business

Shareholder Theory of the Firm

Corporations serve a broad public purpose: *to create value for society* Profit is necessary for survival but other values drive the firms's purpose Corporations have multiple obligations and need to consider all stakeholders

The Corporation's Boundary-Spanning Departments

Departments or offices within an organization that reach across the dividing line that separates the company from groups and people in society Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management's role

3 Arguments that Support Stakeholder Theory

Descriptive Normative Instrumental

Who are the relevant stakeholders?

Draw market and nonmarket stakeholder maps Recognize not all groups are relevant to every situation

Performance-Expectations Gap

Failure to understand stakeholder concerns and to respond appropriately will: - permit the performance-expectation gap to grow - the larger the gap, the greater the risk of stakeholder backlash or of missing business opportunity ex. human antibiotic in chicken

Society

Human beings an the social structures they collectively create

Stakeholder analysis

Includes identification of relevant stakeholders and of their interests and power Who are the relevant stakeholders? What are the interests of each stakeholder? What is the power of each stakeholder? How are coalitions likely to form?

The External Environment of Business

Is dynamic and ever changing The purpose of the firm is not simply to make a profit, but to create value for all its stakeholders - a successful business must meet both its economic and social objectives

Stakeholder Map

Managers can use the salience concept to develop a stakeholder map - a geographical representation of the relationship of stakeholder salience to a particular issue A stakeholder map is a useful tool because it enables managers to see quickly how stakeholders feel about an issue

Chapter 2

Managing Public Issues and Stakeholder Relationships

Two kinds of Stakeholders

Market and Nonmarket

Evaluate Results

Must assess results of the program and make adjustments if necessary

Take Action

Once an option is chosen, the organization must design and implement a plan of action

General Systems Theory (GST)

Organisms do not exist in isolation but can only be understood in relationship to their surroundings Businesses are embedded in a broader social environment with which they constantly interact

Business

Organization engaged in making a product or providing a service for profit

Analyze Issue

Organizations must understand how the issue is likely to evolve, and how it is likely to affect them

Stages in the Business Stakeholder Relationship

Overtime, the nature of business's relationship with its stakeholders often evolve through a series of stages Inactive Reactive Proactive Interactive

Ownership Purpose

Owner's needs and wants Share value

Organizing for Effective Issue Management

Part of the organization is mobilized to address a particular emerging issue, it often depends on the nature of the issue itself - Involve the board of directors and top management levels Effective global leadership on public issues requires three basic capabilities - Understanding of the changing business context - Ability to lead in the face of complexity - Connectedness: the ability to engage with external stakeholders in dialogue and partnership

Stakeholders

People or groups that affect of are affected by a firm's decisions, policies and operations A stake is an interest in, or claim on, a business Stakeholder is NOT the same as stockholder (or shareholders) Stockholders represent one of several kinds of stakeholders

Descriptive

Realistic description of how companies really work

Generate Options

Requires complex judgement that incorporate ethical considerations like the company's reputation

Stakeholder Salience

Salient = Stands out from a background, is seen as important, or draws attention Stakeholders stand out to managers when they have *power, legitimacy and urgency*

Ownership Theory of the Firm

Sees the firm as property of owners (shareholders) Owners' interests take precedence over interests of others The purpose of the firm is to maximize its long-term market value and money for its shareholders

Market Stakeholders

Shareholders, suppliers, employees, etc They engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services

Instrumental

Stakeholder consideration key for effective corporate strategy

Stakeholder Engagement

Stakeholder engagement is ,at its core, *a relationship* The participation of a business organization and at least one stakeholder organization is necessary

Competitive Intelligence

The systematic and continuous process of gathering, analyzing, and managing external information about the organization's competitors that can affect the organization's plans, decisions and operations With the need to comply with all applicable laws, and to follow the professional standards of fairness and honesty

How are stakeholder coalitions likely to form?

Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests Coalitions are very dynamic (can change at any time), and are increasing international Internet has enabled coalitions to form quickly, across political boundaries

Normative

Stakeholder management is the right thing to do

What is the power of each stakeholder?

Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome? There are 5 types of stakeholder power: Voting power Economic power Political power Legal power Informational power

Benefits of Engagement

Stakeholders organizations bring a number of distinct strengths: - Alert companies to emerging issues - Give a firm access to information via networking - Technical or scientific expertise in specific areas - Better result in the eyes of the public - Meet the society's expectations and generate good solutions - Improve a company's reputation

Stakeholder Purpose

Stakeholders' Needs and Wants

Chapter 1

The Corporation and its Stakeholders

Environmental Intelligence

The acquisition of information gained from analyzing the multiple environments affecting organizations

Business and Society

Together they form an interactive system

What are interests of each stakeholder?

What are the groups' concerns? What does the group want/expect from their relationship with the firm?

Purpose of Business

What is the purpose of the corporation? To whom, or what, should the firm be responsible?