1 Strategic Management and Corporate Public Affairs Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved Prepared by Deborah Baker Texas Christian University Chapter 5

2 1. Describe the concept of corporate public policy and relate it to strategic management. 2. Articulate the four major strategy levels and explain enterprise-level strategy. 3. Explain corporate social performance reporting. 4. Identify the major activities of public affairs departments. 5. Highlight key trends with respect to the public affairs function. 6. Link public affairs with the strategic management function. 7. indicate how public affairs may be incorporated into every manager’s job. Chapter 5 Learning Outcomes

3 Chapter 5 Outline  The Concept of Corporate Public Policy  Four Key Strategy Levels  The Strategic Management Process  Public Affairs  Public Affairs as a Part of Strategic Management  The Corporate Public Affairs Function Today  Important Public Affairs Concepts Today  Public Affairs Strategy  Incorporating Public Affairs Thinking into All Managers’ Jobs  Future of Corporate Public Affairs in the Twenty-First Century  Summary  Key Terms  Discussion Questions

4 Introduction to Chapter 5 The chapter provides a broad overview of how social, ethical, and public issues fit into the general strategic management process of the organization.

5 The Concept of Corporate Public Policy Corporate public policy is a firm’s posture, stance, strategy or position regarding the public, social, global, and ethical aspects of stakeholders and corporate functioning AIDS in Workplace Affirmative Action Sexual harassment Product safety Employee privacy Environmental Sustainability

6 Corporate Public Policy and Strategic Management Strategic Management refers to the overall managementprocess that focuses on positioningthe firm relative to its marketenvironment Corporate Public Policy the part of the strategic managementprocess that focuses specifically onthe public, ethical, and stakeholderissues the firm faces

7 Relationship of Ethics to Strategic Management  For business ethics to have meaning it must be linked to business strategy because the linkage permits management issues to be addressed in ethical terms.  The concept of corporate public policy and the linkage between strategic management and ethics can be better understood in terms of: 1.Four key strategy levels 2.Steps in the strategic management process

8 Four Key Strategy Levels Corporate-Level Strategy Business-Level Strategy Functional-Level Strategy Enterprise-Level Strategy “What business(es) are we in or should be in?” “How should we compete in a given business or industry?” “How should a firm integrate subfunctional activities and relate them to its functional areas?” “What is the role of the organization in society?”

9 The Hierarchy of Strategy Levels Corporate-Level Strategy Business-Level Strategy Functional-Level Strategy Enterprise-Level Strategy Feedback Figure 5-1

10 Emphasis on Enterprise-Level Strategy Key Questions  What is the role of our organization in society?  How is our organization perceived by our stakeholders?  What principles or values does our organization represent?  What obligations do we have to society at large, including the world?  What are the broad implications for our current mix of businesses and allocation of resources?

11 Emphasis on Enterprise-Level Strategy Manifestations of Enterprise-Level Thinking  Codes of ethics  Codes of conduct  Mission statements  Values statements  Corporate creeds  Vision statements  Policy-oriented codes and statements

12 Emphasis on Enterprise-Level Strategy Johnson & Johnson Credo We are responsible to our doctors, nurses, and all others who use our products and services. We are responsible to our employees. We are responsible to our communities. We are responsible to our stockholders. Figure 5-3

13 Importance of Core Values Alcoa’s Core Values 1.Integrity 2.Safety and health 3.Quality of work 4.Treatment of people 5.Accountability 6.Profitability

14 Importance of Core Values Herman Miller’s Core Values Inclusiveness & Diversity Supplier Diversity Design Innovation The Environment Operational Excellence Technology

15 Enterprise-Level Strategic Thinking  Establishment of committees: Public policy/issues Ethics Governance Social audit Corporate philanthropy Corporate citizenship Ad hoc committees  Public affairs office  Identification/analysis of social or public issues

16 The Strategic Management Process 1. Goal formulation 2. Strategy formulation 3. Strategy evaluation 4. Strategy implementation 5. Strategic control 6. Environmental analysis

17 Strategic Management Process and Corporate Public Policy Figure 5-4

18 Components of Strategy Formulation Figure 5-5

19 Corporate/Society Intersections 1. Generic social issues 2. Value chain social impacts 3. Social dimensions of competitive context Responsive CSR Strategic CSR

20 Strategic Integration of Business and Society 1. Identify the points of intersection. 2. Choose which social issues to address. 3. Create a corporate social agenda. 4. Integrate inside-out and outside-in practices. 5. Create a social dimension to the value proposition.

21 Social Auditing and Performance Reporting Three Essential Steps 1. Set standards against which performance may be compared 2. Compare actual performance with planned performance 3. Take corrective action to bring actual and planned performance into alignment

22 Development of the Social Audit Social Audit A systematic attempt to identify,measure, monitor, and evaluatean organization’s performancewith respect to its socialefforts, goals, and programs.

23 The Social Audit Figure 5-6

24 Drivers for Social Performance Reports  Expectations from societal and public interests groups  Globalization

25 Global Reporting Initiative Established in 1997 with the missionof developing globally applicableguidelines for reporting on theeconomic, environmental, and socialperformance of corporations,governments, and non-governmentalorganizations.

26 Public Affairs Embraces…  Corporate public policy  Issues and crisis management  Governmental relations  Corporate communications Public Affairs The management processes that focus on the formalization and institutionalization of corporate public policy.

27 Public Affairs Management: Relationships Strategic Management Process Corporate Public Policy Issues Management Crisis Management Public Affairs Management Part of which is Enterprise-Level Strategy Environmental Analysis Figure 5-7

28 The Corporate Public Affairs Function Today 1. The growing magnitude and impact of government 2. The changing nature of the political system 3. The recognition by business that it was being outflanked by interests counter to its own 4. The need to be more active in politics outside the traditional community-related aspects

29 PAC’s Definition of Public Affairs Public Affairs (from PAC) The management function responsible for interpreting the corporation’s non- commercial environment and managing the corporation’s response to that environment.

30 Public Affairs Activities Figure 5-8

31 Influence on Corporate Strategy  Identifies/prioritizes public policy issues  Comments on strategic and business plans for sensitivity to emerging political/social trends  Provides forecast of political/social trends  Implements the strategic and business planning process  Is represented on corporate planning committee Public Affairs…

32 Important Public Affairs Concepts  Looking out and looking in  Buffering and bridging  Tools and techniques  The use of ethical guidelines

33 Looking Out and Looking In The public affairs function serves as a window: Looking out, the organization can observe the changing environment. Looking in, the stakeholders in that environment can observe, try to understand, and interact with the organization.

34 Buffering and Bridging Two types of corporate public affairs activities: 1. Activities that “buffer” the organization from the social and political environment 2. Activities that “bridge” the organization with that environment

35 Tools and Techniques  Environmental monitoring/scanning  Working with the grassroots  Constituency building  Issue advertising  Lobbying  Political action committees  Corporate social audits  Web activism  Coalitions and alliances  Community investment  Stakeholder management

36 Ethical Guidelines for Public Affairs Figure 5-9

37 International Public Affairs The international dimension of public affairs is expanding:  Companies expanding into new markets  Changes in sales in existing markets  Changes in CEO priorities  Changes in regulatory burden  Acquisition of new business units

38 Competencies for International Public Affairs Development of intercultural competence Knowing the impact of societal factors on public affairs Understanding local public policy institutions and processes Nation state-specific applications of PA functions Language skills Understanding global business ethics Managing international consultants, alliances, and issue partners

39 Public Affairs Strategy Best corporate social performance Institution oriented Collaborative/problem-solving strategy Worst corporate social performance Independent economic franchise Individual/adversarial external affairs strategy

40 Miles’s Model of Corporate Social Performance Figure 5-10

41 More Initiatives in Public Relations Strategy  Integrating public affairs into corporate strategic planning  Using strategic management audits for public affairs  Building a balanced performance scorecard for public affairs  Managing the corporation’s reputation  Using core competencies to manage performance  Respond to industry differences  Issue life cycle challenges

42 Public Affairs Thinking Make public affairs truly relevant Develop a sense of ownership of success Make it easy for operating managers Show how public affairs makes a difference

43 The Future of Public Affairs 1. Public affairs can help to develop value-based enterprises 2. Public affairs executives can assert themselves as thought leaders 3. Public affairs specialists have the opportunity to seek alternative arenas of resolution globally and domestically

44  Strategic management processes  Corporate public policy  Corporate public affairs  Strategic management  Enterprise-level strategy  Corporate-level strategy  Business-level strategy  Core values  Value shift  Social audit  Social performance report  Global Reporting Initiative  Public affairs  Public affairs management  Issues and crisis management  Public affairs departments  Public affairs  Public affairs strategy  Collaborative/problem- solving strategy  Individual/adversarial external affairs strategy Selected Key Terms