© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-1 Business and Society POST, LAWRENCE, WEBER Business and Public Issues Chapter 2

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-2 The macroevironment of business Corporation Economic forces - Unemployment - Interest rates - Imports and exports - Balance of payments Political forces - Political relationships - Political processes - Political change Technological Forces - New products and processes - Innovation - Scientific discovery; R&D Social forces - Demographic changes - Social values - Lifestyles Figure 2-1

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-3 The performance-expectations gap Figure 2-2 CorporateStakeholder PerformanceExpectations - Actual performance - Expected corporate performance - Outcomes - What stakeholders want - Results - Satisfaction - Impacts on others - Disappointment or anger “How wide is the gap?”

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-4 Figure 2-3 The public issue life cycle High Low Time Life Cycle of Issue Management Discretion Level of Stakeholder Concerns Phase 1: Changing Stakeholder Expectations Phase 2: Political Action Phase 3: Formal Government Action Phase 4: Legal Implementation

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-5 Corporate public affairs activities Federal government relations State government relations Community relations Trade association relations Local government relations Contributions/philanthropy Grassroots management Issues management Political action committee (PAC) Public interest group relations Regulatory affairs Public relations Media relations Employee communications Education affairs/outreach Volunteer programs Advertising International public affairs Environmental affairs Stockholder relations Institutional investor relations Consumer affairs Exhibit 2-A Source: See Foundation for Public Affairs, “State of Public Affairs, 2000,” Washington, DC: FPA, J.E. Post and J.J. Griffin, “State of Corporate Public Affairs, 1996,” Washington, DC: FPA, 1997.

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-6 The “value added” derived from public affairs management Figure 2-4 Social and Political Intelligence* External action programs*** Internal communication** * Accurate understanding of the people, issues, trends, and factors that can affect the achievement of strategic goals and objectives. ** Capacity for sharing information with internal constituencies, Including the CEO and senior executives of key staff and operating areas. *** Demonstrated capacity for executing programs that achieve desired results with stakeholders.

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-7 Figure 2-5 The issues management process Policy Options Program Design Results Issues Identification Issues Analysis Research Judgement and priority setting Policy and strategy selection Implementation Performance evaluation

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-8 Figure 2-6 The issues priority matrix Impact of Issue on Company HighMediumLow High Medium Low Probability of Issue’s Continued Development High Priority Medium Priority Low Priority

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-9 Strategic management approach to managing external relations Figure 2-7 Today low high Future Amount of uncertainty Crisis management Issues management Strategic planning - Focus on the “here and now” - Intense pressure on decision makers; - Little opportunity to make course corrections - Reactive mode of action dominates - Near-term and intermediate focus on problem - Significant pressure on decision makers; - Some opportunity to make course corrections - Proactive and interactive modes of action dominate - Long-term and intermediate focus - Limited pressure on decision makers; - Ample opportunity to make course corrections - Proactive mode of action (anticipatory) dominates 0

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 2-10 Figure 2-8 Four basic strategies of response to stakeholder issues Stakeholder expectations changes Stakeholder expectations change first Organization initiates change Stakeholder expectations and relations are changing Organization does not change OrganizationStakeholders Organization and environment are changing and there is an effort to adjust to one another’s needs Organization resists, then responds to stakeholders Inactive Strategy Reactive Strategy Proactive Strategy Interactive Strategy