1 A Crowd of Watchdogs: Toward a model of stakeholder agenda-setting in response to corporate initiatives
By Maria Besiou*, Mark Lee Hunter** and Luk N. Van Wassenhove***
* Assistant Professor of Logistics, Kuehne Logistics University, Brooktorkai 20, 20457, Hamburg, Germany, Tel.: +49 40 328707-266,
[email protected] ** Doctor of Communications, Adjunct Professor and Senior Research Fellow, INSEAD Social Innovation Centre, Europe Campus, Boulevard de Constance, 77305, Fontainebleau, France,
[email protected] *** Professor of Operations Management, The Henry Ford Chaired Professor of Manufacturing,
INSEAD,
Europe
Campus,
Boulevard
Fontainebleau, France,
[email protected]
de
Constance,
77305,
2 Abstract
This article seeks to model the agenda-setting strategies of management and stakeholders in three cases involving protests against multinational corporations (MNCs). Our theoretical objective is to widen agenda-setting theory to a contemporary non-linear networked stakeholder context using system dynamics (SD) methodology. We find that largely similar dynamics of interactions occur among stakeholders in these cases, leading to similar outcomes. In particular, the costs for managements of maintaining and advancing their agendas steadily rose, mainly because of indemnities paid out to placate stakeholder groups. We also find that no stakeholder agenda prevailed; however, adversarial stakeholders steadily gained influence, while managements steadily lost it. The overall tendency of events, as more and more stakeholders engaged in the issues at hand, was toward deadlock. We conclude that managers cannot prevail over the sta keholder ―crowd of watchdogs‖, and that initiatives aimed at reinforcing organisational objectives, image or reputation would particularly benefit from more attention to stakeholder feedback loops.
Key words: Agenda-setting, ―Beyond Petroleum‖, crisis, BP, Danone, media, Nike, stakeholder, stakeholder media, system dynamics
3 1. INTRODUCTION
Management dilemmas may be usefully viewed as ―arising from within a system with interdependent elements,
subsystems,
and
networks of relationships and patterns of
interaction‖ (Werhane, 2002, p. 33; Kleindorfer et al., 2009). Stakeholders are vital components of those systems, and they possess a growing ability to influence firms and other stakeholders through their own media (Hunter et al., 2008; Deephouse and Heugens, 2009; Fassin, 2009). However, research on how agendas for firms are affected by stakeholdercontrolled media is to date practically non-existent. That is surprising, in an era when organisations like Greenpeace effectively function as investigative news agencies that define agendas for large activist communities as well as for firms. Understanding the impact of stakeholder-controlled media may greatly improve the ability of organisational leaders and other stakeholders to estimate which strategic initiatives might succeed or fail, and at what cost. This paper attempts to advance that objective. Our main theoretical contribution is to broaden agenda-setting theory to account for stakeholder-controlled media, and in particular for their non-linear effects within firm-centred stakeholder networks. We also contribute to stakeholder theory by broadening understanding of how stakeholders exert influence on management. To do so, we need a methodology appropriate to study the behaviour of non-linear dynamic systems with multiple interactions. Therefore, we apply system dynamics methodology to determine the salience of particular issues in the stakeholder networks of three multinational firms (MNCs) involved in significant crises. In the next passage we review the extant literature on agenda-setting, and in particular research that offers insight into ―stakeholder media‖, defined as ―media produced and controlled by stakeholders with the purposes of promoting the cohesion and interests of a
4 given stakeholder community, and of monitoring and influencing organisations, institutions and other stakeholders‖ (Hunter et al., 2011, p. 4). We then set out the research questions and describe our application of system dynamics methodology. We briefly review key events in each of three cases of corporate crisis. Finally, we construct a preliminary model of stakeholder responses to the agendas of management and other stakeholders. In our discussion we identify implications for agenda-setting theory, directions for further research, and practical implications for organisational leaders and stakeholders.
2. LITERATURE REVIEW: AGENDA-SETTING AND STAKEHOLDER MEDIA
Agenda-setting theory has been applied to both media influence on public opinion (beginning with McCombs and Shaw, 1972), and to the dynamics of political processes, in which media help to determine ―the list of subjects or problems to which governmental officials, and people outside of government closely associated with those officials, are paying some serious attention at any given time‖ (Kingdon, 1995, p. 5; Oakley, 2009). Our focus here is on media influence. As Strömbäck and Kiousis (2010) observe, in the communications domain ―most of the agenda-setting research to date has focused on the correlation between issues on the media agenda and issues on the public agenda.‖ The central claim is that issues which are rendered ―salient‖ through news coverage will also be considered important by the public and decision makers. The process through which issues become salient is called firstlevel agenda-setting (Carroll and McCombs, 2003; McCombs, 2004, 2005). Note that the term ―media‖ is typically used in agenda-setting studies solely to describe print and broadcast news outlets. The first-level agenda setting function is viewed as dominated by the mass news media, which play a gatekeeper role in recognising and legitimating the agendas of other stakeholders (Gamson and Wolfsfeld, 1993; Benford and Snow, 2000; Koopmans, 2004).
5 This underlying assumption has lately been challenged, both conceptually and empirically. Carroll and McCombs (2003) sought to extend the gatekeeper role of agenda-setting influence to include corporate actors. Press releases from major corporations can influence both the choice and the tone of subjects in major newspapers, and thus impact lobbying campaigns (Berger, 2001) and firm reputations (Kiousis et al., 2007). Political blogs may influence public opinion on certain issues as much as mass news media (Woodly, 2008), and rather than mass media setting the agenda for blogs, the reverse may also occur (Zhou and Moy, 2007). Moreover, the salience of issues in the mass news media may be driven by interest groups for whom those issues are of greater concern than for news media professionals or for a general audience (Berger, 2001; Kiousis et al., 2007; Uscinski, 2009). In sum, there is growing reason to suspect that the hegemony of mainstream media over the public agenda has come to an end (Meraz, 2011). Our paper continues and extends this stream. We observe that when an issue is of primary concern not to the general public, but only or mainly to organisations and their stakeholders, the influence of mass media may be secondary or irrelevant. Indeed, on a given issue professional journalists may possess less expertise than certain stakeholders. This leaves the way open for ―infomediaries‖, stakeholders who drive accusative agendas against organisations, and who typically ―require‖ the support of the mass media to achieve influence (Deephouse and Heugens, 2009, p.548). However, media controlled by stakeholder groups have also been observed to play a decisive role in cases where mass news media are absent or minimally engaged. Financial analysts severely impacted the market capitalisation of a multinational firm following a boycott that news media ceased to follow after wrongly reporting its failure (Hunter et al., 2008). In settings ranging from the US Christian Right to the movement against genetically modified organisms and the ―alternative‖ lifestyles and energy movements, researchers have documented the eruption of movements based in communities of lifestyle, practice or interest, supported and
6 driven through media created by participant stakeholders and largely ignored by the mass media in their formative stages (Diamond, 1995; Schurman and Munro, 2006; Sine and Lee, 2009). Clearly, the mass news media neither set these movement agendas nor even noticed them until rather late in the game. A fundamental insight of agenda-setting theory – namely, that agendas are determined by the actions and strategies of engaged actors, transmitted through media – remains valid in these studies. The conceptual difficulty is that when mass media are removed from the picture, agenda-setting theory no longer accounts for the alternative media pathways through which stakeholders may advance their agendas. Stakeholder theory fills some of this gap in agenda-setting theory, but indirectly. Stakeholder-controlled media can clearly make their owners and their claims more visible to other stakeholders, and hence more ―urgent‖ for organisational leaders to address (Mitchell et al., 1997), in at least some cases before news media get involved or after they have abandoned the story. Frooman, in analysing how weak stakeholders build influence strategies, observed that they may persuade stronger stakeholders to withhold essential resources from management, and that various communication techniques are a precondition of their success. He further suggests that understanding such stakeholder influence requires ―including a structural component in stakeholder analysis‖ (Frooman, 1999, pp.192-3). The multiplication of new forms of media controlled by stakeholders – blogs, websites, user forums, mail lists, etc. – implies that the communication structures and networks within which stakeholders seek to set agendas have changed. In addressing these gaps, we advance agenda-setting theory to include stakeholder media as a structural component, and we demonstrate how the agenda-setting influence of certain stakeholders is increased through non-linear interactions among stakeholder groups, that render outcomes unpredictable and more difficult for organisations to control.
7 2.1. Research Questions and Methodology The basic questions of this paper are: How do stakeholders set and diffuse their agendas? What pathways do they take? And what effects can they generate along the way? We begin by assuming that stakeholder-controlled media may capture at least some of the agenda-setting role previously ascribed almost exclusively to mass news media. Our data is drawn from three cases documented in detail by the scholarly literature, and which concern firms from different industries (food, energy and apparel). Stakeholder and management claims expressed through various media varied significantly among these cases. We forgo content analysis of those claims. We do so partly to avoid ―stating or implying the tautology that those who won employed the most resonant framings‖ (Benford and Snow, 2000, p. 626). More important, we suspected that there might be structural commonalities concerning the pathways through which stakeholder agendas and consequent actions generated outcomes, and that these pathways and structures might contribute to agenda-setting effects. We thus ―emphasise the constraining and facilitating role of structural contexts‖ rather than ―put agency at the centre of analysis and emphasise the purposive mobilisation of material resources and symbolic frames as the driving force‖ (Koopmans, 2004: 378). This leads us to our first hypothesis: H1: Stakeholder agenda-setting strategies will be largely similar regardless of the targeted firm or industry. Each of our cases involves a crisis or pre-crisis situation, in which diverse stakeholders play highly visible watchdog roles, closely monitoring and often countering management initiatives. The outcomes of management and stakeholder actions are apparent within discrete time frames, as crises began and were played out. We further suspected that the ensemble of stakeholders in each case generated outcomes that could not be predicted, much less controlled, by any one stakeholder, which leads us to our second hypothesis: H2: No stakeholder can control the cumulative impact over time of agendas advanced
8 by other stakeholders. Finally, we deduce that managing stakeholder agendas may become increasingly complex for the firm over time as more stakeholders become involved in the issue; it may also be increasingly difficult for management to negotiate solutions that satisfy diverse stakeholders (Livesey, 2001). We hypothesise this as follows: H3: Management responses to stakeholder agendas will become increasingly more difficult to formulate and also less effective over time.
2.2. Application of system dynamics (SD) methodology The phenomena embedded in our hypotheses – time lags, feedback among actors, and complex linkages of action and influence that render outcomes non-linear and less predictable – are all features of system dynamics models. SD methodology has been used to capture and model the interaction of different actors in contexts of dynamic complexity and policy resistance (Forrester, 1961; Coyle, 1979, 1996; Sterman, 2000). It has also been used to map the delayed onset of crises following whistle blower revelations in six Japanese firms, in which hidden ethical agendas played a driving role (Tsuchiya, 2003). Not least, SD helps us to avoid a known risk of agenda-setting and framing studies, namely ―locking [the events and discourses under study] in place, as though they were not part of a larger conversation, serving particular interests, and undergoing changes over time‖ (Reese, 2007, p. 149). A fundamental issue in system dynamics is why ―our best efforts to solve problems often make them worse‖ (Sterman, 2001, p.8). Sterman posits that firms operate in a web of actors and influences in which it is extremely difficult to discern between causes and effects. Moreover, over time the complexity of a given system of actors, actions and outcomes tends to increase, reducing a given actor‘s control or ability to obtain desired outcomes. Sterman (1991) also observed that more and more organisational systems are characterised by
9 feedback processes – not only explicit and desired, but also unrecognised and unwanted by one or more actors – and uncertainty. To enable better analysis of such systems, SD seeks to capture and model interactions among their different components. As a first step research objectives must be identified – in our case, to map the interactions among stakeholders and the consequent impact of certain agendas for firms. Then, causal-loop diagrams are abstracted from events within the system. Causal-loop diagrams play two important roles. First, during model development, they serve as preliminary sketches of causal hypotheses. Secondly, they describe the major feedback mechanisms of the system (Coyle, 1996; Sterman, 2000). In sum, the diagrams are used to construct a conceptual model of the system and the interaction of its components. Feedback loops are key mechanisms in the modelling process. A feedback loop is a succession of causes and effects such that a change in a given variable travels around the loop and comes back to affect the initiating variable. In other words, feedback can confirm or counter the effects of what actors in the system say or do. In these loops, arrows (or influence lines) represent the relations among variables. The direction and sign (+) or (-) at the upper end of each influence line explain the cumulative impact of the variables. Feedback loops are either negative (balancing) or positive (reinforcing). The overall polarity of a feedback loop is obtained by the algebraic product of individual signs around the loop – that is, the balancing (negative) or reinforcing (positive) effect of each. If successive increases or decreases in a variable eventually result in an inverse effect on the variable‘s initial position, then the feedback loop is identified as a negative feedback loop. This terminology does not necessarily signify unwanted outcomes. A negative feedback loop exhibits goal-seeking behaviour: After a disturbance, the system seeks to return to an equilibrium situation. Thus negative feedback loops potentially balance a system, because they stimulate stabilised growth and decay patterns.
10 In a positive feedback loop, increases or decreases eventually result in a similar effect on a variable as news move through the loop. In this context the term ―positive‖ does not necessarily signify that the outcome is the one we would most enjoy. It does signify a dynamic through which initial effects are reinforced. Thus positive feedback loops may potentially stimulate unstable, exponential growth or collapse patterns in a system‘s behaviour. In this article we build causal-loop diagrams based on events from three cases, involving the multinational firms Danone SA, BP PLC and Nike Inc., in which stakeholders advanced particular agendas. We proceed by treating each successive step in the cases as a bounded sub-system, with its own inputs and feedback loops. As we advance we combine sub-systems previously diagrammed, extending their effects to successive feedback loops. The first result is to confirm the complex nature of the system under study, and in particular the non-linear character of interactions among stakeholder agendas. The specific content of stakeholder agendas and actions – that is, the precise detail of what someone said or did – is abstracted into positive or negative stimuli in successive diagrams and the cumulative model. We are aware of the risk that in so doing, we ignore effects arising from detailed content features and consequently underestimate the full influence of certain information and actions; in particular, we evacuate what may be considered either as frames or second-level agenda-setting processes, in which interpretative attributes are assigned to issues or events (Scheufele and Tewksbury, 2007). However, we can thereby better focus on the paths that stakeholder feedback takes – in particular, the other stakeholders and agendas that it encounters – as our cases advance in time. We have sought to mitigate the risk of this approach, while keeping the benefit, by referencing every event abstracted into the diagrams in endnotes. In other words, the diagrams map the footprints of stakeholder claims, while their content is captured in notes. In the next section the broad outlines of each case are presented.
11
3. SUMMARY OF THE DANONE, BP AND NIKE CASES 3.1. The Danone boycott In January 2001, the revelation through a leak to a major newspaper that Danone SA, one of France‘s most successful and admired firms, intended to downsize biscuit operations in its home market led to what observers called an unprecedented ―political boycott.‖ The firm refused comment, but let it be known through proxies that restructuring was necessary to improve margins and please investors; financial analysts approved. Union counter-action was supported by deep public and political outrage that a profitable firm was shedding jobs. Danone‘s offer of a humane and relatively generous termination program for workers did not succeed in calming opinion, and in April unions launched a nationwide boycott. News media predicted the boycott‘s failure. However, activist online media promoted it, using parodies of Danone trademarks to denounce the firm, which inspired Danone to sue the online publishers. Rumours that the boycott was succeeding began circulating in May, panicking some investors, but were dismissed by the firm‘s CEO at a Shareholder General Assembly. Management‘s denials were accepted by the news media, which largely abstained from further coverage of the boycott and labour protests, and the stock briefly recovered. The following autumn, the discovery by financial analysts that the boycott had indeed hurt Danone‘s sales, followed by indications that continuing labour action was impacting operations, sales and growth across Danone‘s three main product lines, contributed to an investors‘ flight that was accelerated by the events of 11 September 2001, and that depressed the stock for several years. This summary is drawn from Hunter et al. (2007).
3.2. The Beyond Petroleum campaign The announcement that BP PLC, the world‘s second-largest oil firm, was branding itself as
12 ―Beyond Petroleum‖ in 2000 generated widespread scepticism followed by acceptance in the press and among investors, and durably aggressive responses among environmentalist groups. Almost immediately, Greenpeace redefined BP as ―burning the planet‖, occupied one of BP‘s arctic drilling operations,
and
sought to organise BP‘s activist shareholders against
management. The main threat to BP‘s operations, however, came from within, as employees at the firm‘s Prudhoe Bay field in Alaska seized on the high ethical standards proclaimed by ―Beyond Petroleum‖ to attract attention for their claims that BP was failing to meet its own safety and environmental benchmarks. A series of accidents at Prudhoe Bay, publicised first by activists operating their own media online, and then by news media, drew the increasingly severe attention of regulators, who ultimately posed a serious threat to BP‘s control of its own operations in Alaska. Early in 2005, a catastrophic accident at BP‘s refinery in Texas City and an oil spill in Alaska severely damaged credibility of the ―Beyond Petroleum‖ brand, despite major investments by BP in alternative energies. This summary is drawn from Hunter et al. (2011).
3.3. The Nike anti-sweatshop movement Nike Inc. is well-known not only for its shoes, but as one of the most controversial and crisis-ridden corporations (McHale et al., 2007). Beginning in the 1970s Nike outsourced nearly all its production to Asian suppliers who employed low-skilled, low-wage labour (Lim and Phillips, 2008). This strategy proved highly profitable, and Nike became a model for its industry. However, throughout the 1990s Nike and its suppliers were accused by labour activists and NGOs of wage law violations, child labour, excessive overtime, physical abuse of workers, and unsafe working conditions. In June 1996 Life magazine showed a 12-year-old boy surrounded by the pieces of a Nike soccer ball that he would spend most of a day stitching together for the grand sum of 60 cents. In October 1996, the CBS news program ―48
13 Hours‖ reported mistreatment of workers in developing countries by Nike (Basin, 1996). News media (Gevirtz, 1996; Ikram, 1996; Manning, 1996; Melville, 1997; Klein, 1997; Read, 1997; Cherin, 1999) and activist groups and their media (including Global Exchange, UNICEF, Canadian Catholic Organization for Development, Sweatshop Watch, Citizen Action and Peace and Free The Children) supported union and NGO protests with further revelations. Student groups joined in the campaign in the late 1990s (Duncan, 1997; Saunders, 1997; Stancill, 1997; Wilson, 1997). Their calls for a boycott of Nike generated response from consumers and regulators (Collins, Zoch and McDonald, 2004; McHale, Zompetti and Moffitt, 2007; Palazzo and Basu, 2007). Nike moved from denying the charges to approving routine independent inspection of its subcontractors (Holt, 2002), and establishing a code of conduct on labour and environmental practices (Cropanzano et al., 2004; O‘Rourke, 2006; Graham and Woods, 2006).
4.
MODELING
MANAGEMENT
AND
STAKEHOLDER
AGENDA-SETTING
INTERACTIONS Our analysis has identified 59 feedback loops underlying agenda-setting events in the Danone, BP and Nike cases. Of course, not all these loops can be of equal importance for organisational leaders or their adversaries; we will address that issue later. But first we must understand the structure of the loops. Readers who find this process fastidious may wish to skip to Figure 11, ―Generalised model of agenda-setting dynamics.‖ In this section we model our 59 loops in 11 diagrams. The diagrams begin with single loops and become progressively richer. In the text, variables appear in italics to emphasise their significance; regular typefaces are used in diagrams. Endnotes briefly recapitulate data and page citations from our cases that support specific features of each loop; page references for the Danone case are drawn from Hunter et al. (2008), references for BP are from Hunter et
14 al. (2011), and references for Nike are cited in the endnotes.
4.1. Interaction of investors’ agenda with a firm’s profitability: A general case Figure 1 depicts the following general dynamic: The vast majority of firms aim at the optimisation of their profitability (Firm’s Profitability), which increases through Sales and decreases through the Firm’s Cost. The firm‘s Sales increase through Market Share, which depends in part on the Firm’s Image; hence management may assume that the better the Firm’s Image of the firm‘s products or services, the higher its Market Share will be. A decrease in the Firm’s Profitability impacts its Investors’ Reaction, decreasing the Stock Price, and after a time delay, likewise decreases the Firm’s Profitability. Hence an initial decrease in one variable in this feedback loop (the Firm’s Profitability) eventually results in a decreasing effect on the same variable, creating a positive (reinforcing) feedback loop. --------------------------------Insert Figure 1 about here --------------------------------4.2. Announcing an operational change as a stimulant of the firm’s profitability The management of a firm, in order to increase the Firm’s Profitability, makes a decision that changes something in the firm‘s extant operations. This Change is framed as either increasing Sales or decreasing the Firm’s Cost, and its predicted consequence is to improve the firm‘s processes, capacity or quality of output. This Change may take the form of restructuring1 , as in the Danone case, or of perceived alterations in corporate priorities 2 or safety standards3 , both of which affected BP, or of contracting with suppliers that employ low-wage labour4 (Lim and Phillips, 2008; Firoz and Amaturo, 2002), as in the Nike case. In all these cases, a perceived or potential decrease in the Firm’s Profitability stimulates the trigger event. However, the announcement of changes may provoke Worker Resistance. An
15 initial decrease in the profitability variable eventually results in an increasing effect on the same variable, identifying the feedback loop as a negative (balancing) feedback loop. ------------------------------Insert Figure 2 about here ------------------------------4.3. Stakeholder-controlled media challenge the firm’s profitability In Figure 2 the firm operates without prior knowledge of how media controlled by stakeholders will respond to the workers‘ resistance. However, the Worker Resistance can leak or openly volunteer information and counter-agendas to stakeholder-controlled media (referred to in our diagram as STK, and including media such as strikers‘ tracts, online articles, financial analyst reports, or pro-worker websites)5 and these reports may result in various impacts on the firm. One such impact is Mobilisation of adversaries, which can lead to a Social Movement 6 . The movement may have negative impact on the Firm’s Image7, (Klein et al., 2004) and on its Market Share, Sales and Firm’s Profitability8 . This may lead to different Change9 and Worker Resistance in terms of magnitude or kind, creating a positive feedback loop. In the totality of Figure 3, an initial decrease in the Firm’s Profitability leads to a bigger Change, followed by Worker Resistance, whose agenda is reported and encouraged in further STK (stakeholder) Reports. The STK Reports increase Mobilisation and the Social Movement, which decrease the Firm’s Image, Market Share, Sales and Firm’s Profitability. A Social Movement supports the Worker Resistance10 , which becomes even more dangerous for the firm, thus creating another positive feedback loop.
4.4. News media challenge the firm’s profitability
16 In Figure 4 there are three positive and one negative loops. The Worker Resistance provides information to the News Media11 . News Media Reports influenced by the Worker Resistance negatively affect the Firm’s Image12 , creating a positive loop. Subsequently, negative News Media Reports may reduce the firm‘s determination to execute Change as originally planned13 , creating a negative feedback loop. News Media Reports take account of STK Reports14 ; conversely, STK Reports cite News Media Reports, increasing the overall number of reports (and the salience of the pertinent issues) in a positive feedback loop. The Worker Resistance may also impact the firm‘s Market Share15 by influencing customer perceptions of the firm and its products, generating another positive feedback loop. ----------------------Figure 4 about here ------------------------
4.5. Courts and regulators challenge various stakeholder agendas Mobilisation can lead to Judicial/Regulatory Action, either through retaliation by the firm‘s management against stakeholder activists16 , or conversely, on behalf of stakeholders who believe their interests are affected by the trigger event. 17 Such Judicial/Regulatory Action can further hurt the Firm’s Image. Figure 5 introduces two positive and one negative feedback loops.
4.6. Social movements and media incorporate courts and regulators into their agendas In Figure 6 there are five destabilising and one balancing loops. Judicial/Regulatory Action can also further support the agenda of the Social Movement 18 . Judicial/Regulatory Action also informs and intensifies coverage in STK Reports 19 and in News Media Reports20 .
17 -----------------------Figure 6 about here -----------------------4.7.
Stakeholder-controlled
media
reinforce
worker resistance;
management
responds Earlier, the Worker Resistance turned to stakeholder-controlled media to attract public attention. STK Reports may also act independently to challenge management‘s behaviour and encourage sympathy for the workers‘ cause. (In our cases, stakeholder-controlled media were far more supportive of protestors than of management, with the exception of financial analyst reports.)
21
The firm‘s management now foresees that the impact of Worker Resistance on
Change, reinforced by STK Reports, News Media Reports and Judicial/Regulatory Action, will eventually affect its image with customers. Therefore, management seeks to reduce risks to the Firm’s Image by providing Indemnities to the workers22 , creating seven balancing feedback loops.
------------------------------Insert Figure 7 about here ------------------------------4.8. A decrease in the firm’s market share and management response alters investors’ frames A decrease in the firm‘s Market Share due to STK Reports, Judicial/Regulatory Action, the Worker Resistance and News Media Reports leads to a hostile reaction from Investors that lowers the Stock Price and eventually the Firm’s Profitability. However, the Indemnities may reduce tensions and lead to improvements in the firm‘s Market Share and the Firm’s Profitability, leading to a happy reaction from Investors and increasing the Stock Price
23
,
18 which brings the system toward balance. In Figure 8, below, these shifts are captured in nine positive and nine negative feedback loops. -----------------------Figure 8 about here -----------------------4.9. Interaction of the news media with investors’ agendas Criticism of management by some investors (Investors’ Reaction) attracts News Media Reports, leading to further Investors’ Reaction24 . This dynamic also attracts the attention of stakeholder-controlled media (STK Reports)25 , which further influence the Investors’ Reaction and destabilise the system through 14 positive feedback loops. -----------------------Figure 9 about here -----------------------4.10. “Rumours” challenge the firm’s profitability; management denies, then confirms the information The firm‘s management, in order to prevent a negative Investors’ Reaction that will lead to the reduction of the value of the Stock Price, denies losses in sales, market share or quality resulting from protests26 trying to balance the system. However, even if management denials initially succeed, eventually management confirms the Information, leading to a negative Investors’ Reaction27 that destabilises the system. The interaction of the firm‘s Stock price with the truth of the ―rumours‖ is represented in Figure 10. --------------------------------Insert Figure 10 about here --------------------------------4.11. Parallel events impact the firm and stakeholders
19 Exogenous events that occur in parallel with the Change in the system can trigger News Media Reports as well as STK Reports that impact on the firm. Such events may thereby obscure or override management attempts to resolve conflicts that affect the firm‘s image 28 . They are captured below in Figure 11, which represents a cumulative, generalised model of the three cases under study. ------------------------Figure 11 about here ------------------------The generalised model illustrates the complex nature of the agenda-setting effects generated by the multiple stakeholders that act in each case, the different goals that they pursue (often opposed to one another), and time delays. Clearly, the multiple feedback loops that emerge from the interactions between stakeholders frequently lead to unwanted amplifications for the firm. In effect, management seeks to restore balance to the system, in order to advance its agenda; instead, a crowd of watchdogs pulls the balance apart and blocks the agenda. This generic model is a first effort to reveal some of the inner mechanisms and externalities that create this complex system: though built using cases from three different industries and involving different contents, it exposes common structural characteristics across the three cases, such as the similarity of stakeholder strategies, stakeholder resistance to control, and the inability of management to address complexity, predicted by our three hypotheses.
5. COMPARISON OF THE MODEL WITH FULL CASES In order to check the validity of the generalised model, we implemented it retroactively to see if it captured all significant events that affected agendas in the Danone, BP and Nike cases.
20 In the Danone case two effects sketched in the generic causal-loop diagram do not appear entirely valid. Specifically, News Media Reports did not affect the Change initiated by management, insofar as Danone continued its restructuring initiative in the face of widening protests. Though the firm did sweeten its indemnities to workers, the causal element of the crisis as well as management‘s agenda remained fundamentally unchanged. Moreover, Investors’ Reaction was not fully reported in News Media Reports. In particular, news media did not make a connection between management‘s delayed and partial acknowledgement of the impacts created by protestors and workers, and the subsequent flight of investors from Danone‘s stock. In contrast, financial analysts at this point repeatedly warned that Danone management information was not sufficiently ―visible‖. In Figure 12 we show the resultant causal-loop diagram of the Danone case, which contains 49 feedback loops compared to the 59 feedback loops found in the generalised model. In spite of the necessary customisation to accommodate specifics, it is clear that the generalised model of Figure 11 captures the overall dynamics in the Danone case. ------------------------Figure 12 about here ----------------------Likewise, in the BP case some impacts sketched in the generic causal-loop diagram are not reflected in events, so far as we can discern from firm announcements, news and stakeholdercontrolled media. Specifically, we note that the Worker Resistance within BP did not significantly affect the firm‘s Market Share. The difference here from the Danone and Nike cases may be due to the fact that news coverage of worker protests in Alaska was largely restricted to the business press, and in particular The Financial Times. Thus stakeholders who do not follow business news had little opportunity of being exposed to worker agendas, unless they followed certain environmentalist and left-wing political websites. In Figure 13 we
21 present the causal-loop diagram of the BP case (50 feedback loops). We note again that the generalised model captures the essentials of the BP case, even though some customisation is necessary. Finally, in the Nike case we also find that some impacts sketched in the generic causalloop diagram are not reflected in events. Specifically, we note that unlike Danone, management at Nike did not find itself obliged to deny and then confirm ―rumours‖ that cast the firm in a bad light. Nor did Worker Resistance within Nike directly affect the firm‘s Market Share; however, this impact was delayed, and became visible after the locus of conflict shifted from factories in Asia to campuses in the US. Finally, as in the Danone case, news media did not correlate decreases in Nike‘s stock price with stakeholder protest mobilisations. In fact, news media eventually gave Nike credit for a good faith effort to end abuses in its suppliers‘ plants, at a time when other leading apparel manufacturers likewise moved their production to Asia and faced similar accusations. In Figure 14 we present the causal-loop diagram of the Nike case (40 feedback loops). The principal events depicted in the generalised model are once again present. ------------------------Figure 14 about here ------------------------We conclude that while our generalised model cannot capture every possible variation between Danone, BP and Nike, it can indeed serve as a basis for customisation to include the specifics of a particular case.
6. DISCUSSION 6.1. Implications for Agenda-setting Theory What common story do the diagrams tell? It begins with a management agenda that aims at
22 making the firm more profitable for its investors. But certain stakeholders resist a change that they view as contrary to their own interests. Their resistance is noticed, reported, and amplified by other stakeholders, achieving the heightened impact associated with new or previously ignored information about problems (Jones and Baumgartner, 2005). The stakeholder mobilisation raises costs for management‘s initiative,
through indemnities,
damage to reputation, regulatory action and investor disaffection. The circle of resisting stakeholders eventually includes the customers whose purchases support the firm‘s profits. The combination of rising costs and falling revenues convinces investors that management cannot succeed. Parallel agendas arise among investors and protestors: They have become a crowd of watchdogs, closely monitoring management in defence of their own interests. As H1 predicts, the diverse activist agendas and industry settings in the three cases display remarkably similar dynamics – in particular, widening opposition to management‘s agenda. Agenda-setting theory helps to account for this phenomenon. The first-level salience of a given issue can theoretically be reinforced by either opposition or approbation for actors and their agendas, because ―even the rejection of a demand has to reproduce that demand and thereby diffuses it further in the public sphere‖ (Koopmans, 2004: 374). Rising salience, in turn, makes the issue a more urgent task for other stakeholders. Management thus faces proliferating claims on its attention, while critical scrutiny of management multiplies. Our findings also support H2, which proposes that no stakeholder can control the impact over time of agendas advanced by other stakeholders. The loss of control that emerges from our diagrams is progressive,
general and
mutual;
neither managements nor activist
stakeholders can impose their agendas and solutions. Management‘s agendas remain in the foreground, but are progressively transformed from recipes for increased profitability to recipes for sustained conflict. For example, Nike protestors agreed with management that producing in Asia was more profitable for the firm in large part because of lower labour costs,
23 but punished the firm for doing so. A common outcome appears: As more and more stakeholders become involved with issues aroused by management, the overall tendency is toward deadlock, because no stakeholder decisively prevails over the others. Thus the dilemma predicted by H3 – that it becomes more and more difficult for management to devise and negotiate a solution – appears in these cases. In all three cases management seeks to deal with the deadlock through indemnities offered to key stakeholders, and in all three cases, the tactic eventually fails. What management does not do in any of our cases is change its agenda, even as that agenda generates growing costs. In sum, agenda-setting in the stakeholder network around a firm is a process in which power is neither unilateral nor definitive. Resistance matters, and there are powerful dynamics that diffuse and support it. By modelling those dynamics, we offer insight into a growing stream in the literature, in which the strategies or reputations of firms are overturned by stakeholder reactions. Porritt (2005, p. 198) identified the risk of a ―Bottom Line Backlash‖ effect on reputation, embodied in ―hostility to companies that are seen as making large profits at the expense of other stakeholders.‖ Corporate social responsibility (CSR) initiatives can backfire on a firm‘s reputation – in a general sense, by exposing firms to charges of hypocrisy by the news media (Dickson and Eckman, 2008), and because consumers may sceptically attribute self-seeking motives to firms that undertake CSR initiatives (Vlachos et al., 2009). The same may occur to stakeholder groups whose influence becomes visibly threatening (Jasper and Poulsen, 1993). Our study suggests that one explanation for these inversions lies in feedback loops through which adversarial agendas gain momentum. While our model cannot capture all the interactions among all stakeholders who may be present in every future case, we confirm that system dynamics can help to weigh what can and should be done in the face of complex issues (Pruyt and Kwakkel, 2007). Our model can be used as a dynamic basis from which one can customise and add pertinent specifics. For
24 example, Tsuchiya (2003), using a similar approach, found that explicit ethical concerns and whistle blowers play a larger role than in our model, reflecting her case studies and their Japanese cultural context. Our hypotheses could be tested further, and our model could be refined, through adding more cases to cover more dynamics. Three more foundation steps must be undertaken: first, formulation of a simulation model with estimations of parameters and initial conditions, which can be fine-tuned by adding more cases and data. Then, the model should be tested by extreme condition cases, to explore its limits and verify its quality. Finally, the effects of different policies or actions on the system should be evaluated by conducting simulations. Actual cases could be followed in real time, to predict what is likely to happen next and propose more options for action.
6.2. Implications for Organisational Leaders The generalised model and its application to our three cases suggest why it may be difficult for managers not only to expect but to predict how non-linear effects such as time lags and feedback loops will play out. At the most basic level, it is very difficult to pay attention to events that are moving in several directions at once, unless one is mapping them as they occur. Yet within this complexity, common dynamics and a common error are at work. While the strategies of actors in these cases remain largely constant, leading to similar outcomes, the same actors (and especially managements) act as if the outcomes were under their control. Unfortunately for them, that is not the case. Even if one is not interested in system dynamics or modelling, this key message should be clear. In our three cases, managers persist with an agenda in the face of resistance that is widening and diversifying past the possibility of resolution. That is a high-cost, high-risk strategy, especially over the longer term. In confrontations with stakeholder networks, time is
25 not on management‘s side. Management has a considerable advantage in terms of setting the initial agenda, but ―great success in getting one's preferred meanings featured prominently in media discourse does not ensure dominance‖ (Gamson et al., 1992, p.382). Adversaries do not need to score a decisive victory; they need only continue to raise the marginal costs for management of pursuing its agenda, in order to change the agendas of other stakeholders toward the firm. Organisational leaders cannot give every stakeholder everything that stakeholder might want, of course. But neither can managers impose their agendas on stakeholders who join together to resist and define alternative agendas, except at growing cost. Leaders in an age of networked stakeholders are only one node in a complex network they cannot control, in which actions and reactions can come back like a boomerang. Whatever the final outcome, management will not determine or impose it alone. There are two implications of this emerging system that organisations will have to progressively integrate. First, management must be transparent, because a crowd of watchdogs is at the door. Management moves are monitored, and even weak adversarial responses may be amplified through stakeholder feedback loops. Over time, their feedback can prevail over even the most determined leaders. Second, and perhaps most important, that same feedback also indicates what may be possible for leaders to achieve, and what is surely necessary for them to take into account. By identifying the actors driving feedback loops, management can seek to engage them and address the issues that motivate them; alternatively, management can address other players in the same loops, in effect using one stakeholder to influence another. Our model shows that this is best done before adversaries diversify in number to the point where indemnifying one or the other of them will have little effect. If not, management may eventually be forced to accept that it cannot prevail, and change its objectives.
26 Endnotes
1
Danone management‘s plans to close factories in France were leaked to the press, and its refusal or inability to
confirm or deny reported information led immediately to strikes and other labour action; p. 337. 2
The announcement that BP was moving ―beyond petroleum‖ generated visible unease among its core bus iness
employees, which was acknowledged in a subsequent news report by a firm executive; p. 18. 3
Like all the major oil companies, BP was under considerable pressure to improve its margins. This led to the
accusation by workers, cited in the press, and true or not, that the firm was economising on safety and staffing in order to control costs; pp. 29-30. 4
As early as the 1980s, Nike was criticised for sourcing its products in factories and countries where low wages,
poor working conditions, and human rights problems were usual. Then, during the 1990s, a series of public relations nightmares—involving underpaid workers in Indonesia, child labour in Cambodia and Pakistan, and poor working conditions in China and Vietnam—became news. Nike initially denied responsibility for workers at these factories since they were not Nike employees (Locke et al., 2007). 5
Danone workers sought to support their boycott movement by distributing tracts listing all brands owned by
Danone, p. 339. BP workers provided information to stakeholder media (such as The Project on Government Oversight, www.pogo.org) concerning the firm‘s Prudhoe Bay operations) and were supported by a self-defined ―advocate‖, Charles Hamel, who was widely quoted by anti-globalist and anti-industry sites, pp. 27-28. Workers from Nike‘s suppliers provided information to the activist website Sweatshopwatch.org,, such as that they were not aware of mandatory overtime at the time they were hired (Firoz and Amaturo, 2002). 6
The boycott of Danone spread from workers to Left politicians of numerous towns, other unions, and a national
consumer boycott movement, supported by a network of Internet sites; pp. 338-340; the boycott of Nike products spread from workers and activists to university students (Firoz and Amaturo, 2002). 7
Danone pursued its Internet-based critics for libel in a series of civil actions; pp. 340-341. BP faced widening
criticism from shareholders and increasingly hostile attention to its Prudhoe Bay operations as a consequence of employee-generated publicity; pp. 23-24. Nike suffered from damaged brand image and reputation because of subsequent consumer boycott but realis ing the potentially punishing force of consumer opinion (Brunk and Blümelhuber, 2011).
27
8
During the most active period of the boycott, Danone‘s sales in its home market of France declined by
approximately 10%. Labour action also impacted Danone‘s logistics across product lines. Danone later reported a decline of about 3% in its market share for biscuits in France, the centre of the crisis, in the year following these events; pp. 341-342. See also Danone, ―Rapport d‘Activité 2004‖, p. 26. In 1997 Nike‘s sales dropped 8% in the company's third quarter, and footwear sales in the U.S. were down 18% (Saporito, 1998). 9
Nike approved routine independent inspection of its subcontractors, created the position of Vice President for
Corporate Social Responsibility (Fox et al., 2005), opened up its operations to its most adamant critics (Holt, 2002) and established a code of conduct on labour practices (O‘Rourke, 2006; Graham and Woods, 2006). Later, to maintain consumers‘ trust in its brand, Nike found it necessary to move toward more transparent processes and agreed to higher pay for workers and more supervision of subcontractors (Cropanzano et al., 2004; Firoz and Amaturo, 2002). 10
Danone‘s attempts to sue its critics met with only partial vindication, and then reversal in the courts,
demonstrating to union activists that they were neither isolated nor condemned to failure; p. 346. BP shareholder activists explicitly demanded resolution of safety issues at Prudhoe Bay that were widely reported in news and stakeholder media; pp. 23-24. Concerning Nike, on 9 January 2001 in Atlixco de Puebla, Mexico went on strike to demand recognition of their union and because some workers were illegally fired. They were supported by their parents (most of the workers were young women from rural villages surrounding Atlixco) and by unions from the Volkswagen plant in the nearby city of Puebla. On January 12 police attacked striking workers. January 17 was a day of action on campuses across the country. Protestors called on university administrators to sanction Nike and ensure that the rights of workers were respected. See Global Exchange, ―Nike refuses to take responsiblity‖,
14
January
2001,
accessed
24
August
2011,
http://www.globalexchange.org/campaigns/sweatshops/nike/kukdong011401.html). 11
Danone workers consistently sought to build an image as loyal partners of the firm who had been unjustly
made redundant; p. 338. BP workers fed information directly to at least one prominent correspondent, Sheila McNulty of The Financial Times; p. 29. In the Nike case CBS television reports in 1996 helped to mobilise a transnational anti-Nike network, including Global Exchange (U.S.), Justice. Do It Nike! (U.S.), Press for Change (U.S.), Vietnam Labor Watch (U.S., Vietnam), Nike: Fair Play? (Netherlands), and Let‘s Go Fair (Switzerland) (Lim and Phillips, 2008).
28
12
Not only accidents and worker protests at Prudhoe Bay, but also shareholder protests (pp. 23-25) against BP
were widely reported. At Nike, workers in a Jakarta factory told Global Allianc e researchers that female employees were asked to trade sexual favors for jobs (Luh, 2002). 13
While Danone did not abandon its plans, it did alter their content in an attempt to appease public opinion,
which was massively hostile to the restructuring; p. 337. BP withdrew from the industry trade group Arctic Power and announced that ―safety will be our number-one priority‖ at the Prudhoe Bay field; pp. 30, 32. While Nike did not stop contracting with Asian suppliers, the firm created the position of Vice Pre sident for Corporate Social Responsibility in part to monitor them. 14
The daily newspaper Libération reprinted union tracts providing lists of Danone brands, and the ensemble of
French newspapers closely reported the conflict between management and Interne t-based adversaries. Likewise, protestor websites cited supportive and hostile news coverage of their actions; pp. 338-340. In BP, news media apparently followed the website of the Project on Government Oversight, www.Pogo.org, where activist Charles Hamel served on the board, and which published leaked BP internal documents. Articles based on this information in the Financial Times were subsequently reprinted on numerous environmentalist websites; pp. 2829. 15
Danone reported diminished growth in all business sectors in the French market through the first half of 2001,
during the most intense period of protest activity, and growth of its biscuit sector remained depressed for the following two years. This information passed largely unnoticed in the news med ia, but was noted by financial analysts. See ―Danone: Une croissance sous tension‖, Société de Bourse Wargny, October 2001, and François Digard, ―Danone.‖, ING Barings, 9 and 11 October and 16 November, 2001. 16
Danone‘s attempts to sue its online critics led to sustained hostile publicity and negative judicial consequences
for the firm; pp. 339-340. Following the announcement of ―Beyond Petroleum,‖ Greenpeace activists occupied a BP barge at the Northstar site in the Arctic to dramatise their claim that BP stood for ―burning the planet.‖ The occupiers were arrested and charged in Federal court, generating further publicity hostile to BP; p. 23. The Clinton Administration sought to harvest political capital by convening the Apparel Industry Partnership (AIP) which included Nike, other major companies, labour unions, and human rights, religious, and consumer organisations (Lim and Phillips, 2008). 17
Following the initial leak of Danone‘s restructuring plans, the French government, at the time on the Left,
threatened legislation to ban firings at profitable firms; p. 337. State and Federal regulators of BP responded to workers‘ charges by intensifying inspections and demands for documentation at Prudhoe Bay; p. 31. In April
29
1998, California attorney Marc Kasky filed a lawsuit (California Business and Professional Code, n.d.) against Nike for ―unfair and unsafe practices‖ prohibited by California statutes based on truth in commercial communication (McHale et al., 2007). 18
A striking example from the Danone case occurred when a Trotskyite elected official had himself named a
union representative so that he could legally militate against the firm inside its plant at Evry; p. 337. The expectation of Prudhoe Bay workers and their stakeholder allies that regulatory actio n would work in their favour was demonstrated by their avid attempts to persuade regulators in Alaska to intervene against the firm; pp. 31-32. 19
Web searches demonstrate this intensification. Forty-one separate websites published all or part of the legal
documents in Danone‘s case against its online adversaries. Moreover, nearly 1800 separate ―articles‖ including the terms ―boycott‖ and ―Danone‖ appeared in Google groups as of July 2009; p. 340. Greenpeace‘s initial protests against BP, and subsequent judicial action against the protestors, were widely reported by environmentalist and anti-globalist online media; p. 23. (See, for example, ―Help Greenpeace confront oil giant BP in the Arctic‖ on the site of Cruelty Free Living, http://www.crueltyfree.ork.uk/cfl/200004/art10.htm, accessed July 2009.) For Nike, Kasky‘s lawsuit generated significant stakeholder coverage (for example, ―Nike v. Kasky: Corporations Are Not Persons‖. CorpWatch.org, 4 May 2003). 20
This dynamic appears with new angles in a crisis. Thus Danone‘s lawsuit against online adversaries was
widely covered in the French press: pp. 339-340. The intervention of regulators at Prudhoe Bay against BP regularly resulted in news coverage, notably at the Financial Times; p. 13. (McNulty, 2002, 2003). Kasky‘s lawsuit also generated copious news media coverage, including Associated Press, ―State high court to decide if Nike violated false-advertising laws. Mark Kasky sued Nike‖, 22 June 2000. 21
Sometimes they support anticipated events: The adversarial website jeboycottedanone.com adopted as its
slogan ―Human Beings Are Not Yogurts!‖, and demanded reinstatement of downsized workers of Danone even before any downsizing had occurred; p. 339. Charles Hamel, the self-described BP workers‘ advocate, became a major stakeholder source, was cited in 1070 pages found via a Google search using the terms ―anwr drilling hamel‖ in September 2009; p. 28. An example gives the general flavour and tone: see Leopold (2005). For Nike, see note 12. 22
In the sense we are using the term, ―indemnities‖ applies to management efforts to address worker concerns
caused or perceived to be caused by change. In that sense, the announcement by BP management that ―safety will be our number-one priority‖ at the Prudhoe Bay field in January 2003 represented such an indemnity; p. 32.
30
In March 2001, Danone proposed a series of ―social‖ measures for restructuring that went far beyond compliance with those demanded by French law; p. 337. For Nike ―indemnities‖ apply to raises in wages (Firoz and Ammaturo, 2002). 23
Danone stock sold for over 76 euros per share at the beginning of February 2001, when management‘s
apparent determination to pursue restructuring was welcomed by analys ts. Hostile worker and political reaction led to a brief decline, and then a rise when Danone‘s humane restructuring measures were announced at the end of March. Worker determination remained, however, and two weeks after the boycott began in April, Danone ‘s stock fell to under 67 euros per share. Management redressed the situation at the end of May by declaring that it would continue to act humanely toward workers, and that the boycott had failed; pp. 340, 342. The intensity of adversarial activity around Prudhoe Bay coincided with slight declines in BP‘s stock at the end of 2002, followed by a brief upward spike at the beginning of 2003 (when the firm announced that ―safety will be our number one priority‖ at the field), and then a slight second decline. 24
In January 2003, a leading UK ethical investment fund made news by announcing that it was selling its BP
holdings because of safety and environmental incidents in Alaska. It was soon followed by the World Wide Fund for Nature, which likewise announced that it was selling its BP holdings for the same reasons, and likewise became news; p. 31. 25
The key stakeholder-controlled media in the Danone case, aside from the Internet-based protestors previously
mentioned, were financial analysts. In mid-summer 2001, a consensus existed among analysts that Danone management had successfully weathered the boycott. That consensus flagged at summer‘s end, when first half results showed discernible effects that management had previously passed over, and the stock began to decline. By early winter, a new consensus among analysts took shape as they warned investors away from the stock; p. 341. A similar dynamic figured explicitly in activist strategies to counter BP. Greenpeace not only reported on investor conflicts with BP management over environmental and safety issues, but actively promoted such conflicts by organising shareholder protests. See pp. 23-24. In the Nike case, as with Danone, key stakeholdercontrolled media included financial analysts who initially supported management to investors starting warning investors. (See, for example, Morgan Stanley Dean Witter, ―U.S. Investment Research: A report on conditions in international manufacturing facilities for NIKE. Nike is doing a ‗good job‘‖, 26 June 1997). 26
At Danone‘s General Shareholders Assembly on 29 May 2001, management announced that the boycott had
no effect on group sales worldwide, omitting mention of its effects in France, and declared that ―the storm is over.‖ None of these points was fully accurate; p. 340.
31
27
Danone‘s provision of successive quarterly results demonstrating the ongoing effects of the boycott and social
movement, and countering management reassurances, preceded a sharp and sustained decline in Danone‘s share price; pp. 340-342. BP, in contrast, did not deny the existence of safety issues at Prudhoe Bay (pp. 30-31), and declines in its share price following successive incidents were minor and transient. 28
In March 2001, the announcement of an exemplary set of compensatory measures for Danone wo rkers, which
management had expected would end the crisis, was overshadowed by the sudden closing of a Marks & Spencer store in Paris and the firing of its staff. Public outrage confounded the two cases, and the boycott of Danone began immediately thereafter; p. 338. In the spring of 2005, an explosion at BP‘s Texas City refinery killed 15 men and unleashed a firestorm of hostile public, judiciary, regulatory and legislative attention on the firm. A side effect of the disaster was to legitimate critics of the firm‘s operations in Prudhoe Bay, where a subsequent oil spill unleashed a similar storm, overwhelming any positive impacts of the firm‘s efforts to make safety ―our number one priority‖; p. 34.
32
References
Basin, R. (1996). Boycott Nike. CBS News 48 Hours, 17 October. Benford, R. D. and Snow, D. A. (2000). Framing Processes and Social Movements: An Overview and Assessment. Full Annual Review of Sociology 26(1), 611-640. Berger, B. K. (2001). Private Issues and Public Policy: Locating the Corporate Agenda in Agenda-Setting Theory. Journal of Public Relations Research 13(2), 91-126. Brunk, K. H. and Blümelhuber, C. (2011). One strike and you're out: Qualitative insights into the formation of consumers' ethical company or brand perceptions. Journal of Business Research 64, 134-141. Carroll, C. E. and McCombs, M.E. (2003). Agenda-setting Effects of Business News on the Public‘s Images and Opinions about Major Corporations. Corporate Reputation Review 6(1), 36-46. Cherin, J. (11 May 1999). China Protesters Urge U.S. Goods Boycott Through Internet. Dow Jones International News. Collins, E. L., Zoch, L. M. and McDonald, C. S. (2004). When [professional] worlds collide: Implications of Kasky v. Nike for corporate reputation management. Public Relations Review 30(4), 411-417. Coyle, R. G. (1979). Management System Dynamics. New York: Wiley and Sons. Coyle, R. G. (1996). System Dynamics Modelling: A practical approach. Chapman & Hall. Cropanzano, R., Chrobot-Mason, D., Rupp, D. E. and Prehar, C. A. (2004). Accountability for Corporate Injustice. Human Resource Management Review 14, 107-133. Deephouse, D. L. and Heugens, P. P. M. A. R. (2009). Linking Social Issues to Organizational Impact: The Role of Infomediaries and the Infomediary Process. Journal of Business Ethics 86, 541-553.
33
Diamond, S. (1995). Roads to Dominion: Right-wing Movements and Political Power in the United States. The Guilford Press. Dickson, M. A. and Eckman, M. (2008). Media Portrayal of Voluntary Public Reporting About
Corporate
Social Responsibility
Performance: Does
Coverage
Encourage or
Discourage Ethical Management? Journal of Business Ethics 83, 725-743. Duncan, C. (1997). Activists share information about Nike with Dean Smith. Associated Press Newswires (31 October). Fassin, Y. (2009). The Stakeholder Model Refined. Journal of Business Ethics 84, 113135. Firoz, N. M. and Ammaturo, C. R. (2002). Sweatshop Labour Practices: The Bottom Line to Bring Change to the New Millennium Case of the Apparel Industry. Humanomics 18(1/2), 29-45. Forrester, J. W. (1961). Industrial dynamics. Cambridge: MIT Press. Fox, J. B., Donohue, J. M. and Wu, J. (2005). Beyond the Image of Foreign Direct Investment in China: Where Ethics Meets Public Relations. Journal of Business Ethics 56(4), 317-324. Frooman, J. (1999). Stakeholder Influence Strategies. Academy of Management Review 24(2), 191-205. Gamson, W. A., Croteau, D., Hoynes, W. and Sasson, T. (1992). Media Images and the Social Construction of Reality. Annual Review of Sociology 18, 373-393. Gamson, W. A ., and Wolfsfeld, G. (1993). Movements and Media as Interacting Systems. Annals of the American Academy of Political and Social Science 528, 114-125. Gevirtz, L. (1996). Reebok invites Nike to stamp out child labor. Reuters News (26 September).
34
Graham, D. and Woods, N. G. (2006). Making Corporate Self-Regulation Effective in Developing Countries. World Development 34(5), 868-883. Holt, D. B. (2002). Why Do Brands Cause Trouble? A Dialectical Theory of Consumer Culture and Branding. Journal of Consumer Research 29(1), 70-90. Hunter, M. L., Le Menestrel, M. and De Bettignies, H.-C. (2008). Beyond Control: Crisis strategies and stakeholder media in the Danone boycott of 2001. Corporate Reputation Review 11(4), 335-350. Hunter, M. L., Van Wassenhove, L. N., Besiou, M. and Van Halderen, M. (2011). The Agenda-setting Power of Stakeholder Media. INSEAD Working Paper. Ikram, T. (1996). Nike plant in Pakistan takes aim at child labor. Reuters News (25 November). Jasper, J. M. and Poulsen, J. (1993). Fighting Back: Vulnerabilities, Blunders, and Countermobilization by the Targets in Animal Rights Campaigns. Sociologial Forum 8(4), 639-657. Jones, B. D., and Baumgartner, F. R. (2005). The Politics of Attention: How Government Prioritizes Problems. Chicago: University of Chicago Press. Kingdon, J. W. (1995). Agendas, Alternatives, and Public Policies, 2nd ed. New York: Harper Collins. Kiousis, S., Popescu, C. and Mitrook, M. (2007). Understanding Influence on Corporate Reputation: An Examination of Public Relations Efforts, Media Coverage, Public Opinion, and Financial Performance from an Agenda-Building and Agenda-Setting Perspective. Journal of Public Relations Research 19(2), 147-165. Klein, N. (1997). Just doing it lands Nike in ethical hot water. The Toronto Star (24 February).
35
Klein, J. G., Smith, N. C. and John, A. (2004). Why We Boycott: Consumer Motivations for Boycott Participation. Journal of Marketing 68, 92-109. Kingdon, J. W. (1995). Agendas, Alternatives, and Public Policies, 2nd ed. New York: Harper Collins. Kleindorfer, P. R., Wind, Y. and Gunther, R. E. (2009). The Network Challenge: Strategy, Profit, and Risk in an Interlinked World. New Jersey: Pearson Prentice Hall. Koopmans, R. (2004). Movements and Media: Selection Processes and Evolutionary Dynamics in the Public Sphere. Theory and Society 33(3-4), 367-391. Leopold, J. (2005). It Could be Worse than Exxon Valdez: Drilling and Spilling in the ANWR.
http://www.counterpunch.org/leopold04202005.html.
(21
April;
accessed
10
September 2009). Lim, S.-J. and Phillips, J. (2008). Embedding CSR Values: The Global Footwear Industry‘s Evolving Governance Structure. Journal of Business Ethics 81, 143-156. Livesey, S. M. (2001). Eco-identity as discursive struggle: Royal Dutch Shell, Brent Spar, and Nigeria. Journal of Business Communication 38(1), 58-91 . Locke, R. M., Qin, F. and Brause, A. (2007). Does Monitoring Improve Labor Standards? Lessons from Nike. Industrial and Labor Relations Review 61(1), 3-31. Luh, S. S. (2002). Report Claims Abuses by Nike Contractors; Sporting-Goods Firm Funded Study in Indonesia, Intends to Verify It. Wall Street Journal (22 February). Manning, J. (1996). Nike Hails Factory that Bans Child Labor. The Oregonian (26 November). McCombs, M. E. (2004). Setting the Agenda: The Mass Media and Public Opinion. Polity Press, Cambridge, UK. McCombs, M. E. (2005). A look at agenda-setting: past, present and future. Journalism Studies 6(4), 543-557.
36
McCombs, M. E. and Shaw, D. L. (1972). The Agenda-setting Function of Mass Media. Public Opinion Quarterly 36(2), 176-187. McHale, J. P., Zompetti, J. P. and Moffitt, M. A. (2007). A Hegemonic Model of Crisis Communication: Truthfulness and Repercussions for Free Speech in Kasky v. Nike. Journal of Business Communication 44(4), 374-402. McNulty, S. (2002). BP Wells May Be Regulated. Financial Times (2 October). McNulty, S. (2003). Judge tightens controls over BP‘s Alaska unit. Financial Times (3 January). Melville, G. (1997). Critics Can‘t Stop Swatting the Swoosh. Footwear News (26 May). Meraz, S. (2011). The Fight for How to Think: Traditional media, social networks, and issue interpretation. Journalism 12(1), 107-127. Mitchell, R. K., Agle, B. R. and Wood, D. J. (1997). Toward a theory of stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. Academy of Management Review 22(4), 853-86. Oakley, M. R. (2009). Agenda Setting and State Policy Diffusion: The Effects of Media Attention, State Court Decisions, and Policy Learning on Fetal Killing Policy. Social Science Quarterly 90(1), 164-178. O‘Rourke, D. (2006). Multi-stakeholder Regulation: Privatizing or Socializing Global Labor Standards? World Development 34(5), 899-918. Palazzo, G. and Basu, K. (2007). The Ethical Backlash of Corporate Branding. Journal of Business Ethics 73(4), 333-346. Porritt, D. (2005). The Reputational Failure of Financial Success: The ‗Bottom Line Backlash‘ Effect. Corporate Reputation Review 8(3), 198-213. Pruyt, E. and Kwakkel, J. (2007). Combining System Dynamics and Ethics: Towards More Science? Paper presented at the 25th International Conference of the System Dynamics
37
Society, July 29 - August 2, Boston, U.S.A. Read, R. (1997). New Report Puts Nike in Labor Spotlight. The Oregonian (21 September). Reese, S.D. (2007). The Framing Project: A Bridging Model for Media Research Revisited. Journal of Communication 57, 148–154. Saporito, B. (1998). Can Nike get unstuck? Time 151(12), 48. Saunders, B. (1997). Conscience still twinges on campus. Raleigh News & Observer (6 November). Scheufele, D. A. and Tewksbury, D. (2007). Framing, Agenda Setting, and Priming: The Evolution of Three Media Effects Models. Journal of Communication 57, 9-20. Schurman, R. and Munro, W. (2006). Ideas, Thinkers and Social Networks: The Process of Grievance Construction in the Anti-Genetic Engineering Movement. Theory and Society 35(1), 1-38. Sine, W. D. and Lee, B. H. (2009). Tilting at Windmills? The Environmental Movement and the Emergence of the U.S. Wind Energy Sector. Administrative Science Quarterly 54, 123-155. Stancill, J. (1997). UNC activists organizing big-game play against Nike. Raleigh News & Observer (30 October). Sterman, J. D. (1991). A skeptic‘s guide to computer models. In: Barney, G. O., Kreutzer, W. B., Garrett, M. J. (Eds.), Managing a Nation: The Microcomputer Software Catalog. Boulder: Westview Press. Sterman, J. D. (2000). Business dynamics: Systems thinking and modelling for a complex world. McGraw-Hill. Sterman, J. D. (2001). System Dynamics Modeling: Tools for Learning in a Complex World. California Management Review 43(4), 8-25.
38
Strömbäck, J. and Kiousis, S. (2010). A New Look at Agenda-Setting Effects – Comparing the Predictive Power of Overall Political News Consumption and Specific News Media Consumption Across Different Media Channels and Media Types. Journal of Communication 60, 271-292. Tsuchiya, T. (2003). Corporate Business Ethics - Analysis and Leverage. Paper presented at the 21st International Conference of the System Dynamics Society, July 20 - 24, New York, New York, U.S.A. Uscinski, J. E. (2009). When Does the Public‘s Issue Agenda Affect the Media‘s Issue Agenda (and Vice-Versa)? Developing a Framework for Media-Public Influence. Social Science Quarterly 90(4), 796-815. Vlachos, P. A., Tsamakos, A., Vrochopoulos, A. P. and Avramidis, P. K. (2009). Corporate Social Responsibility: attributions, loyalty, and the mediating role of trust. Journal of the Academy of Marketing Sciences 37, 170-180. Werhane, P.H. (2002). Moral Imagination and Systems Thinking. Journal of Business Ethics 38, 33-42. Wilson, E. (1997). Labor Rallies on Seventh Ave. Women's Wear Daily (7 October). Woodly, D. (2008). New competencies in democratic communication? Blogs, agenda setting and political participation. Public Choice 134,109–123. Zhou, Y. and Moy, P. (2007). Parsing Framing Processes: The Interplay Between Online Public Opinion and Media Coverage. Journal of Communication 57, 79–98.
39
FIGURE 1: Interaction of investors‘ agenda with a firm‘s profitability
+
Firm’s profitability Firm’s cost
+
Sales
FIRM Stock price
+
Market share
-
+
Firm’s image -
Investors’ reaction
INVESTORS
40
FIGURE 2: Announcing an operational change as a stimulant of the firm‘s profitability
-
Change (Quality, processes, capacity) -
+
Worker resistance
WORKERS
Firm’s cost
FIRM
-
Firm’s profitability
+
Stock price -
-
Investors’ reaction
INVESTORS
41
FIGURE 3: Stakeholder-controlled media challenge the firm‘s profitability
FIRM
+
Firm’s profitability
+
-
Change (Quality, processes, capacity)
Sales
+
Market share
+
Stock price
Firm’s image +
Worker resistance
+
WORKERS +
MEDIA STK reports
SOCIETY +
Mobilisation
Social movement +
-
Investors’ reaction
INVESTORS
42
FIGURE 4: Interaction of the firm‘s profitability with the media
+
Firm’s profitability
-
Change (Quality, processes, capacity) -
FIRM
+
Sales
Stock price
+
Market share
-
+
Firm’s image
-
+
Worker resistance
-
+
WORKERS +
News media reports +
MEDIA +
STK reports
SOCIETY +
Social movement +
Mobilisation
-
Investors’ reaction
INVESTORS
43
FIGURE 5: Courts and regulators challenge various stakeholder frames FIRM
+
Firm’s profitability -
+
Change (Quality, processes, capacity) -
Sales
Stock price
+
Market share
+
Firm’s image
-
Worker resistance
+
-
+
WORKERS +
MEDIA News media reports
+
STK reports
SOCIETY +
Mobilisation +
-
Social movement +
Judicial/ Regulatory action
REGULATORS
-
-
Investors’ reaction
INVESTORS
44
FIGURE 6: Social movements and media incorporate courts and regulators into their agendas
+
Firm’s profitability
FIRM
+
Stock price
+
Sales
-
Change (Quality, processes, capacity)
Market share
Firm’s image
-
+
-
+ -
-
WORKERS +
MEDIA News media reports
STK reports +
+
SOCIETY +
Mobilisation
Social movement +
Investors’ reaction
INVESTORS
-
Worker resistance
-
+
+
+
Judicial/ Regulatory action
REGULATORS
45
FIGURE 7: Stakeholder-controlled media reinforce worker resistance; management responds
+ -
Change (Quality, processes, capacity)
Firm’s profitability
+
Sales
Stock price
+
Market share
-
+
Firm’s image
-
+
+
Indemnities
FIRM
Worker resistance
-
-
WORKERS +
+
MEDIA
News media reports
STK reports
SOCIETY +
+
+
INVESTORS
-
+
Mobilisation +
Social movement + +
Judicial/ Regulatory action
REGULATORS
Investors’ reaction
-
46
FIGURE 8: A decrease in the firm‘s market share and management response alters investors‘ frames
+
Firm’s profitability
+
Sales
-
-
Change (Quality, processes, capacity)
+
-
+
Firm’s image
FIRM
Worker resistance +
-
-
Market share
+
Indemnities
Stock price
+
-
INVESTORS -
-
+
WORKERS +
MEDIA
News media reports +
STK reports +
SOCIETY +
Mobilisation +
Investors’ reaction
Social movement +
+
Judicial/ Regulatory action
REGULATORS
47
FIGURE 9: Interaction of the news media with investors‘ reaction
Firm’s profitability
-
Change (Quality, processes, capacity)
-
+
-
Stock price
+ -
Market share
+
Firm’s image
FIRM
Worker resistance
WORKERS
-
+
STK reports
+
+
+
Social movement
SOCIETY +
Mobilisation +
+
+
Judicial/ Regulatory action
REGULATORS
Investors’ reaction
INVESTORS -
MEDIA
-
-
-
+ +
News media reports +
+
Sales
+
Indemnities
+
-
48
FIGURE 10: ―Rumours‖ challenge the firm‘s profitability; management denies then confirms the information
Rumours’ denial
-
Firm’s profitability
+
Sales
Change (Quality, processes, capacity)
+
+ -
Worker resistance
-
-
+
-
WORKERS +
+
MEDIA
News media reports
STK reports
+
+
+
-
Firm’s image
+
FIRM
+
Indemnities
Market share
+
Correct information Stock price
+
-
-
+
+
SOCIETY Social +
movement Mobilisation
+
+
+
Judicial/ Regulatory action
REGULATORS
Investors’ reaction
INVESTORS
-
49
FIGURE 11: Generalised model of agenda-setting dynamics including parallel events
SYSTEM BOUNDARIES
Change (Quality, processes, capacity)
+
-
Market share
Firm’s image
+ -
Worker resistance
-
-
-
+
+
Parallel events
+
MEDIA
News media reports +
+
STK reports +
+
+
SOCIETY Social +
movement Mobilisation
+
Investors’ reaction
INVESTORS
-
WORKERS +
-
+
FIRM
+
Indemnities
+
Correct information Stock price
+
-
-
Rumours’ denial
-
Firm’s profitability
+
+
Judicial/ Regulatory action
REGULATORS
-
50
FIGURE 12: Causal-loop diagram of the Danone case
SYSTEM BOUNDARIES Firm’s profitability Change (Quality, processes, capacity)
-
Market share
Worker resistance
-
Firm’s image
+ -
-
+
+
Parallel events
+
MEDIA
News media reports +
STK reports +
+
SOCIETY Social +
movement Mobilisation
+
-
Investors’ reaction
INVESTORS
-
WORKERS +
-
+
FIRM
+
Indemnities
+
Correct information Stock price
+
-
+
Rumours’ denial
-
+
+
Judicial/ Regulatory action
REGULATORS
-
51
FIGURE 13: Causal-loop diagram of the BP case
SYSTEM BOUNDARIES Firm’s profitability
Market share
Change (Quality, processes, capacity)
+
Indemnities
Firm’s image
+ -
Worker resistance
-
-
-
+
+
Parallel events
+
MEDIA
News media reports +
+
STK reports +
+
+
SOCIETY Social +
movement Mobilisation
+
Investors’ reaction
INVESTORS
-
WORKERS +
-
+
FIRM
+
+
Correct information Stock price
+
-
-
Rumours’ denial
-
+
+
Judicial/ Regulatory action
REGULATORS
52
FIGURE 14: Causal-loop diagram of the Nike case
SYSTEM BOUNDARIES Firm’s profitability
+
-
-
Market share
Change (Quality, processes, capacity)
+
-
+
FIRM
+
Indemnities
Stock price Firm’s image
-
Worker resistance
-
-
-
+
INVESTORS
-
WORKERS +
+
MEDIA
News media reports +
STK reports +
+
SOCIETY Social +
movement Mobilisation
+
Investors’ reaction
+
+
Judicial/ Regulatory action
REGULATORS
