Lerbinger O. Corporate Public Affairs. Interacting with Interest Groups, Media, and Government

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Box 1.1 Political Resources Used by Microsoft to Influence

Government

• Political campaign contributions: Gave $1.5 million to candidates in

both parties, plus soft money gifts of over $860,000 and $1 million to

help underwrite the two political conventions in the summer of 2000.

• Legal talent: Engaged blue-chip law firms and legal experts, con

straining major firms from working for Microsoft’s competitors.

• Lobbyists: Built an in-house lobby shop of 14, from zero in 1995,

and spent $4.6 million on lobbying in 1999. One of the lobbyists

hired is Ralph Reed, who is George W. Bush’s top adviser.

• Direct lobbying: Chairman Bill Gates and CEO Steve Ballmer visited

Washington, DC, immediately after Judge Jackson’s April 3 ruling

that Microsoft violated antitrust laws. Gates participated in a tech

nology summit set up by President Clinton and then visited con

gressional leaders in four meetings on Capitol Hill.

• Grassroots pressure: Organized a website called the Freedom to In-

novate Network. Shareholders received a letter, dated April 4, that

defends its antitrust position and lets them “know where we stand

and what you can do to help.” The letter states Microsoft created

the network “to provide an effective method for you and other con-

cerned citizens to communicate directly with government officials.”

• Public relations: After Judge Jackson’s April 3 ruling that Microsoft

had stifled innovations, Microsoft spent millions on television ads

featuring Bill Gates talking about Microsoft’s innovations. And after

Jackson’s April 30 proposal to break the company into two units,

Microsoft placed a full-page ad, signed by Chairman Bill Gates and

President and CEO Steve Ballmer, that appeared in the May 1 edi-

tions of major newspapers.

• Charitable giving: A multimillion dollar effort by the Gates Founda-

tion, including $10 million to the U.S. Capitol Visitors Center.

• Think tanks: Wrote six-digit checks to those that supported its posi

tion, and withdrew support from those that didn’t (e.g., the Ameri

can Enterprise Institute, because of Robert H. Bork, a former

federal judge and one of the institute’s senior fellows).

• Opinion polls: Funded and distributed to the media polls that

showed lack of public interest in the Department of Justice case.

• Television image advertising: Put a friendly face on its name instead

of hawking its products in trade publications. In three new television

commercials, one depicted the company’s technology as a positive

force in society; a second showed a mischievous son trying to tap

into a website his mother warned him not to go to, but is stopped

by safeguards installed on his computer; a third showed a dyslexic

girl in her bedroom using a computer program to help her learn

how to read.

reflected in public goodwill stemming from a favorable corporate im

age, which would be lost, at least temporarily, by public outrage against

questionable or outright unethical and illegal behavior by a corpora

tion. A company’s legitimacy is further reinforced when it has an im

pressive history and a corporate culture that commands respect and

when it espouses policies that win public support.

Public Affairs Activities

Public affairs managers face the formidable task of mobilizing corporate

political resources for the purpose of influencing other participants in

the public policy process. This is achieved by engaging in an ever-enlarg

ing variety of public affairs activities. The core activity has long been

government relations. In fact, before the term public affairs was more

widely used, the list of activities would simply refer to the three levels of

government relations: federal, state, and local.

Today, however, public affairs is more than government relations, as

is evident in the 1999–2000 survey of 1,087 companies by the Founda-

tion for Public Affairs.

Based on 223 companies that had a formalized

government relations program, the report listed 25 functions within a

public affairs department. Only three specifically refer to government

relations; another two—grassroots/grasstops lobbying and regulatory

affairs—might be embraced by the term. The complete list is as follows:

Federal government relations (87%)

Business/trade association memberships (84%)

Issues management (83%)

State government relations (83%)

Grassroots/grasstops lobbying (81%)

Local government relations (79%)

Political action committee (75%)

Direct corporate contributions (73%)

Public policy group relations (70%)

Community relations (61%)

Public interest group relations (58%)

Regulatory affairs (55%)

Public relations (54%)

Media relations (54%)

Employee communications (49%)

International public affairs (43%)

Employee volunteer programs (40%)

Internet (38%)

Corporate foundation (35%)

Educational relations (35%)

Advertising (28%)

Environmental affairs (22%)

Stockholder relations (18%)

AN OVERVIEW OF CORPORATE PUBLIC AFFAIRS I 13

Institutional investor relations (13%)

Consumer affairs (13%)

Besides government, the list recognizes two other forces in the politi

cal arena: media relations and public policy group relations (i.e., public

interest groups). The fourth, underlying force—the general public (ex

pressed through public opinion)—is not explicitly listed, but is repre

sented by reference to public relations and practically every stakeholder

group associated with public relations: community relations, employee

communications, educational relations, stockholder relations, institu

tional investor relations, and consumer affairs. Moreover, some activi

ties associated with public relations are also included: direct corporate

contributions, corporate foundations, employee volunteer programs,

and advertising (presumably institutional and issues advertising). Pub

lic relations activities are obviously an integral part of public affairs.

The broad scope of public affairs beyond government relations and

public relations is further reflected in the inclusion of several specialized

activities: business/trade association membership, issues management,

public policy group relations, political action committee, international

public affairs, and the Internet. Of these, issues management, moved

from seventh to third place since 1996, because, as stated in the Founda-

tion’s survey, it “has matured into a core public affairs function” and is

a responsibility whose implementation is shared with staff and line ex-

ecutives elsewhere in a company (116 companies out of 213 report the

regular involvement of non-public-affairs personnel in issues manage-

ment).

As discussed throughout this volume, issues management

serves as a major frame of reference for public affairs planning. Three

other activities—business/trade association membership, public policy

group relations, and political action committees—enable a corporation

to leverage its political influence.

Inclusion of international public affairs recognizes the global arena in

which corporations now operate. Although this book concentrates on

the U.S. scene, most of the strategies and techniques are applicable, al

beit with some modifications, in other countries. Furthermore, global

ization is itself an issue, as well as the many specific issues relating to it

(e.g., free trade, overseas codes of conduct, global warming, and protec

tion of intellectual property rights).

The Public Policy Process

Public affairs extends beyond government relations because it entails

a role in the public policy process larger than that of influencing legis

lative and regulatory decisions. It refers to all of the various ways

public policy is made in our society to address the concerns of society.

Thus a corporation may decide to work out its own public policy so

lution with stakeholders by voluntarily changing its corporate poli

14 I CHAPTER 1

cies and behavior or by negotiating with stakeholders to arrive at a

mutually acceptable solution. These solutions can be seen as an alter

native public policy process to that of government and may occur at

any of the three stages in the life cycle of an issue. There is an advan

tage to engaging in the process in the early stages of an issue’s life cy

cle, when it emerges and when it involves the public. During these

earlier stages, a company has a better chance to influence the out

come of an issue than after the process has proceeded to the public in

volvement or legislative stage.

When the Chemical Manufacturers Association (now called the

American Chemical Society) adopted its Responsible Care program

with guidelines that exceeded governmental requirements, this trade

association engaged in public policy making. So did apparel makers

such as Nike, Reebok, and Liz Claiborne when they formed a task force

to develop a code to reassure the public that their products were not

made in sweatshops.

Similarly, when one chain saw manufacturer

decided to add a safety lock to its chain saws, despite opposition by its

own trade association, the company engaged in policy making. Thus,

the public policy process refers to all the various methods by which

public policy is made by a diversity of organizations and groups in our

society.

One reason a company engages in a private public policy process is

to preempt government action. An example is the Trojan Nuclear Plant

of Portland General Electric, which hired the consulting firm of Kearns

& West to engage in what was called collaborative planning. The aim

was to find a win–win solution on the vital public policy issue of what

to do with an ailing nuclear power plant beset with technical problems

and one of the worst performance ratings in the nation. Portland Gen-

eral Electric was targeted by antinuclear groups, including the Coali-

tion for Safe Power, Don’t Waste Oregon, and Physicians for Social

Responsibility. One of the groups, Don’t Waste Oregon, sponsored a

referendum on the November 1990 ballot to shut down the plant.

Rather than face this possibility, the utility chose its own public policy

process. Using a variety of research tools—focus group meetings, sur

veys, and dialogue sessions—a solution was agreed on by all concerned

parties: The plant would be allowed to keep operating 2 more years

without extensive retrofitting. (See chap. 3 for further details about

this case.)

Openness With Stakeholders

A corporation commits itself to operating as an open system when it

embraces public relations and public affairs. An open organization is

permeable; it interacts with its environment at many points along its

boundary with society. It is ready to listen to stakeholders, include their

concerns in decision making, and sometimes involve them in coalitions

AN OVERVIEW OF CORPORATE PUBLIC AFFAIRS I 15

and collaborative decision making. In contrast, a closed system is like a

fortress, recognizing its interactions with society only through the eco

nomic marketplaces for necessary inputs (e.g., factors of production)

and outputs (of its products and services).

Viewing an organization as an open system greatly influences how a

corporation conducts its public affairs activities. First, by shunning a re

active approach, it favors a proactive or interactive approach. It seeks to

shape the environment in which it operates and to work with groups in

society rather than impose its own view on them.

These virtues of an open system are seen in sharp contrast to organi

zations that operate as closed systems. The latter are defensive, often

deny criticism, and are often aggressive toward outside agitators and

“antis” who stir up trouble. Indeed, some social activists are avowed

protesters and “serial demanders” who are unwilling to consider argu

ments contrary to their stated positions. Business should not be simi

larly rigid and refuse to acknowledge the possible validity of social

grievances and demands made by stakeholders. Furthermore, they

shun direct confrontation with attackers in the hope of warding off

unfavorable publicity. They will rely on legal approaches to “keep the

hounds at bay,” if not to defang or exterminate the opposition. Believ-

ing that conflicts are caused by public misunderstanding or ignorance,

if not outright malice, they ask their public relations staff to

“straighten people out” by creating public understanding, building fa-

vorable public opinion, and educating employees and the public on the

“American way.”

A second way in which operating as an open corporation influences

public affairs activities is by accepting the concept of mutual benefit;

that is, that both the corporation and its stakeholders can benefit. A cor-

poration’s responsibilities to society go beyond producing goods and

services at a profit. While recognizing the primacy of operating in the

interests of its stockholders, a corporation acknowledges that the inter

ests of customers, employees, and the local community, as well as con

cern for the physical environment, must be factored into decision

making. Managers seek stakeholder symmetry. Finally, a corporation

honors a wider range of human values than solely economic ones.

Several public affairs arguments support the recognition of social re

sponsibility. First, if a significant gap exists between public expectations

and a corporation’s social performance, the ensuing social tension leads

to loss of public confidence in business and a demand for government

intervention. This consequence defeats the corporate public affairs ob

jective of maintaining a balance of power with government. Closely re

lated to this objective is a second argument, that a company may wisely

choose to resolve a grievance or demand by dealing directly with the

stakeholder(s) involved. This option is not as available to companies

that ignore stakeholders and their interests.

A third argument says that a public affairs campaign often requires

grassroots support, which can more easily be achieved through sound

16 I CHAPTER 1

relationships with a company’s stakeholders and the support of public

opinion.

THREE CHARACTERISTICS

OF PUBLIC AFFAIRS COMMUNICATION

Public affairs communication supports the public affairs function as

practiced by large corporations, government, and public interest

groups. Some basic knowledge of public affairs—including the related

concepts of public policy process and issues management—is helpful in

understanding the role of communication. Readers who already possess

this knowledge can quickly scan this overview; others may want to

study this background more carefully.

Public affairs communication possesses three characteristics: (a) It

follows the steps of strategic campaign management; (b) it uses the pro

cess of issues management; and (c) it chooses media appropriate to the

life cycle stage of an issue.

Strategic Campaign Management

Public affairs communication is part of strategic campaign manage-

ment, which, in turn, relates to the broader concept of strategic plan-

ning or management. It is considered a critical characteristic of excellent

public relations departments.

The basic idea is that everything an or-

ganization does must in some way relate to its goals. Thus, Richard Daft

defines strategy as a “current set of plans, decisions, and objectives that

have been adopted to achieve the organization’s goals.”

The relation-

ship between goals and strategy is that goals define where an organiza-

tion wants to go; strategy defines how it will get there. As Robert

Dilenschneider, a public relations consultant, states, the central ques-

tion in strategic thinking is, “Why are we doing this?”

In other words,

goals must be considered, as well as their relationship to the organiza

tion’s stated mission, or its basic purpose.

Besides reference to goals, strategic planning recognizes the growing

significance of environmental impacts on an organization. Environ

mental scanning and monitoring not only identifies issues but also ana

lyzes an organization’s strengths and weaknesses in meeting the

opportunities and threats in the environment—this is called SWOT

analysis. This information helps public affairs professionals to find or

correct the fit between external opportunities and internal strengths.

Communication activities are a major part of strategic campaign

management. The relationship of communication messages and chan

nels to other elements of an overall campaign must therefore be under

stood. The central focus of a campaign is its objectives, best defined as

expected results. In public affairs, results pertain to the quality and

agreeableness of public policies that are formulated. These policies ap

pear in the form of government legislation and regulation or in agree

AN OVERVIEW OF CORPORATE PUBLIC AFFAIRS I 17

ments and understandings with a company’s stakeholders—

investors,employees,customers,suppliers,dealers,communityciti

zens, and any other group that affects the success or failure of the

company. In general terms, public affairs is effective when it enhances

a company’s power to shape events and the environment in which it

must operate.

Strategic campaign management is implemented by designing a

campaign, which uses some type of problem-solving process. In public

relations, John E. Marston’s RACE formula—which includes the stages

of research, action, communication, and evaluation—continues to be

one of the better known problem-solving processes.

Another version

isthatofScottM.Cutlip,AllenH.Center,andGlenM.Broom,which

lists four basic steps to solving problems: (a) defining the problem, (b)

planning and programming, (c) taking action and communicating,

and (d) evaluating the program.

A public affairs campaign imple

ments the problem-solving process, which, like other communication

campaigns, includes the following minimum components:

1. Statement and analysis of the situation.

2. Objectives.

3. Strategy.

4. Target audiences.

5. Message.

6. Media/channels.

7. Timing.

8. Budget.

9. Evaluation.

The strategy component is especially important in public affairs be-

cause it establishes fundamental orientations. One element is how to

view other participants in the public policy process: whether to play it

alone or form coalitions, and whether to fight opponents or try to nego

tiate. Another is what organizational resources to employ, for example,

whether to rely exclusively on expert lobbyists or to use other tools,

such as grassroots lobbying and advocacy advertising.

Most other components refer to elements of a communication model:

who says what (message), to whom (target audiences), through what

channels (media/channels), and with what effects (evaluation). Timing

and budget are additional variables.

Process of Issues Management

Public affairs communication uses the process of issues management,

which is a powerful tool used by public affairs professionals to identify

and evaluate governmental and societal issues that could significantly

impact their organization.

18 I CHAPTER 1

Issue Life Cycle. A major framework of issues management is the

categorization of an issue by its life cycle stage. Although different mod

els are used to define the life cycle stages, a simplified one is the follow

ing (shown in Fig. 2.1 in chap. 2):

1. Emerging issue stage. An issue appears when a thought leader con

ceives it and attempts to gain support from interest group opinion

leaders and their supporters. These issue initiators use media suit

able for reaching small audiences.

2. Public involvement stage. If opinion leaders and the interest groups

are successful in their publicity efforts, the mass media will report

on the issue and thereby make the public aware of it.

3. Legislative stage. Legislators become aware of the issue from the

media, from public opinion surveys, and directly from their con

stituents; then they proceed with the legislative process.

4. Regulation/litigation stage. Because laws are complex, government

agencies interpret and implement them by formulating regula

tions. The ensuing regulations are often controversial, thus those

affected by them file lawsuits to challenge them or defend them-

selves against suits brought by government and aggrieved groups

to force compliance.

Issues in the life cycle stage of facing litigation or immediate legisla-

tive action usually receive urgent attention, whereas emerging issues

are simply monitored. However, once an issue is on the public agenda

(the media and the public talk about it), communication efforts must

be undertaken, paying attention to active political participants. Public

opinion surveys help determine how involved the general public or

special publics are and what their leanings are. An examination of the

media—perhaps using formal content analysis procedures—shows

the amount and kind of media coverage the issue receives. Finally, any

legal or regulatory aspects of an issue must be considered; for example,

do antitrust laws or environmental laws apply, as well as possible con

stitutional considerations (e.g., free speech).

Issues Management Process. Issues management is a problem-

solving process that follows five steps: issue identification, issue prior

itization, issue analysis, strategy formulation, and implementation.

1. Issue identification. By scanning and monitoring the sociopolit

ical environment, an organization lists the issues of immediate or po

tential concern to an organization. Scanning is a broader, less focused

way of looking for issues, events, and trends relevant to an organiza

tion’s strategic goals; monitoring focuses on the previously identified

variables. The typical method of identifying issues is to talk with key

executives and experts within one’s company, other companies in an

AN OVERVIEW OF CORPORATE PUBLIC AFFAIRS I 19

industry, and trade associations. Another is to scan the literature rel

evant to one’s industry, sometimes using the research technique of

content analysis.

A further useful technique is scenario planning, especially relevant

when one’s environment is highly volatile and looking into the future

is important. As two authorities on scenario writing said, “You can’t

predict the future, but you can put together a process that takes a

pretty good shot at it in an uncertain world.”

Scenarios are de

scribed by the Global Business Network as “tools for ordering one’s

perceptions about alternative future environments in which today’s

decisions might be played out.”

Scenario planning is different from forecasting because instead of

extrapolating current trends from the present, scenarios present al

ternative images, some of which may be sharply discontinuous

from known ones. The basic technique is to create a set of stories,

written or spoken, built around carefully constructed plots. These

stories can express multiple perspectives and give meaning to the

complex events that stories present. Although there is no single

standard for scenario writing, one approach is to present stylized

narratives, much in the manner of a screenplay or novel. Each has a

plot and contains a sequence of plausible, interrelated, connected

events. More than one scenario is typically written; they usually

come in sets of three, showing a trend progressing from the present

to the future.

2. Issue prioritization. This process is used to select the top issues

for attention. After compiling a list of 50 issues, for example, one

company selected 10 for attention during the following year. Three

criteria apply:

• Imminence of action: Concentrate on issues that have the high-

est chance of occurring, particularly in the near future.

• Impact on the organization: Focus on issues that have strategic

importance and the greatest impact on the company activities in

terms of profits, costs, and reputation.

• Actionability: Choose issues that you can do something about—

either alone or with allies.

3. Issue analysis. Once an issue has been identified and assigned a

high priority by a company, it is analyzed so that an effective strat

egy can be formulated. A blend of professional judgment, practical

experience, and research competence is needed for a clear understand

ing of an issue and the appropriate response to it. Analysis requires

an examination of 5 aspects of an issue: the nature of an issue; its life

cycle stage; identification of political participants; importance of

public opinion; amount and kind of media coverage; and its legal,

regulatory, and constitutional context.

Regarding the nature of an issue, one of the most useful classifica

tions was developed by Peter F. Bartha, research and analysis man

20 I CHAPTER 1

ager in the corporate affairs department of Imperial Oil.

identified four types of issues:

• Universal—Affect the general public in a direct, personal man

ner (e.g., unemployment, inflation, energy crisis). Government

is expected to deal with it in a relatively simple manner.

• Advocacy—Groups claiming to represent broad public interests,

such as environmental and consumer groups, initiate an issue

that is a potential rather than actual problem for most of the

public. The typical solution is the belief that “somebody (not

necessarily government) ought to do something about it.”

• Selective—Matters of concern to special interest groups based

on demographic, geographic, occupational, sectoral, or other

similar criteria (e.g., tariff protection for the steel industry). In

volved groups are likely to concentrate their efforts on building

up their own constituency rather than on broad grassroots sup

port, unless they feel they can relate their special interest with

the public interest.

• Technical—Matters the public is willing to leave to experts (e.g.,

regulatory issues). These issues are negotiated by specialists in

interest groups and government bureaucracy on the basis of

well-reasoned and well-documented arguments.

4. Strategy formulation. An organization decides on the position it

will take on an issue and how it will respond to it. Issue analysis will

suggest whether a company should contain or resolve an emerging

issue or become proactive and influence public opinion before others

do—following the reasoning that once opinions are crystalized, they

are difficult to change. Thus, if an emerging issue gains momentum

and the public is likely to become aware of it, a company’s strategy is

to act quickly to shape opinions. Should legislators become interested

in an issue, it can escalate to legislative action or a crisis.

Several types of common strategy decisions must be considered:

choosing the appropriate “mode”—whether to be reactive (which is

seldom advised), proactive, or interactive; whether to undertake vol

untary public policy changes; or whether to act alone or form a coali

tion with others.

In addition, one of three sets of strategies formalized by John F.

Mahon should be selected—containing, shaping, and coping—all of

which relate to different life cycle positions of an issue. Containment

applies to an emerging issue that individuals or groups espouse and

for which they seek to attract broader public attention. The strategy

is to prevent an issue from receiving media and pubic support. Thus a

company may decide to deal with the issue directly or with those who

are promoting it. A variety of tactics apply: setting up a special com

mittee to look into the issue, attacking or undermining the advocacy

group, or attempting to frame an issue in a manner favorable to one

self. Shaping strategies apply to issues already on the public agenda

AN OVERVIEW OF CORPORATE PUBLIC AFFAIRS I 21