Do public relations professionals understand corporate governance issues well enough to advise companies on stakeholder relationship management?

doi:10.1016/j.pubrev.2013.10.003

Public Relations Review

Volume 40, Issue 2, June 2014, Pages 161-170

https://doi.org/10.1016/j.pubrev.2013.10.003 Get rights and content

Highlights

•
Senior public relations practitioners’ knowledge on corporate governance is limited, but they acknowledge its importance.
•
Six role functions are proposed for managing stakeholder relationships on a strategic or managerial level.
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These role functions are aligned with the King III principles on stakeholder relationship management in support of corporate governance efforts.

Abstract

The King Reports on Governance for South Africa are internationally respected for proposing integrated reporting in a triple bottom-line business context to improve corporate governance. The most recent report, King III, views stakeholder relationship management as a key tenet of corporate governance. This raises the question whether public relations professionals (PRPs) understand the principles of corporate governance well-enough to inform and guide organizations on the management of stakeholder relationships. The views of senior PRPs at selected top performing companies were elicited on their practice of stakeholder relationship management in line with corporate governance principles. It was found that their knowledge on corporate governance was limited, although they recognized its importance. They propose six role functions for managing stakeholder relationships on a strategic or managerial level; these role functions are aligned with the King III principles on stakeholder relationships. The following three were of particular importance: developing a corporate strategy, giving advice to senior management and managing crisis communication. Different terminologies were used to build relations with stakeholders and different approaches were used to profile stakeholders. It is recommended that organizations leverage their public relations functions on strategic and managerial levels in support of their corporate governance efforts. In turn, PRPs are encouraged to ensure a deep knowledge on corporate governance issues when counseling senior management on building stakeholder relationships.

Introduction

The alarming increase in financial crises from 11 in the 18th century to 33 in the 20th and an expected 60 in the 21st (Spitzeck & Hansen, 2010, p. 38) has resulted in businesses and governments questioning the way in which companies are managed and how business decisions are made. Managers should have moral and ethical responsibilities to all stakeholders to ensure the long-term sustainability of their business (Sundaram & Inkpen, 2004, p. 370). The Cadbury Report of 1992 in the United Kingdom and the Sarbanes-Oxley Act of 2002 in the USA are examples of early efforts to point out the importance of corporate governance to reduce global financial crises. The King Code of Governance for South Africa 2009 (hereafter referred to as King III) was however probably the first to view stakeholder relationships as a key tenet to ensure good corporate governance. Chapter 8 of the Report entitled ‘Governing Stakeholder Relationships’ proposes six stakeholder relationship management principles that the Board of Directors should include in their corporate governance practices.

The success of any organization is inextricably linked to three interdependent sub-systems – environment, society and the global economy (Tomorrow's Company, n.d., p. 4). These three systems, commonly referred to as planet, people and profit, should form part of companies’ discussions on corporate sustainability (Institute of Directors, 2009, p. 12). This train of thought fits well with the strategic constituency perspective as the theoretical paradigm in which the current research was conducted. This perspective holds that an organization has a number of stakeholders, each with different degrees of power (Love & Skitmore, 1996, p. 7) and that business success is largely influenced by the extent to which the organization is able to meet these multiple stakeholders’ needs and demands. Quinn and Rohrbaugh (1983, p. 364) state that the negative impact of stakeholders can be minimized by identifying the key strategic stakeholders and by understanding and being willing to consider and satisfy their needs and demands.

Section snippets

Research question

The question that guided the research is whether South African public relations professionals (PRPs) understand corporate governance issues well enough to advise their companies on stakeholder relationship management to ensure organizational sustainability in a triple-bottom context.

The management of stakeholder relationships

In order to address the research question, three terms used in the literature to describe the management of stakeholder relationships are presented, followed by a comparative paragraph and table pointing out the differences and the overlaps between them. The six principles on governing stakeholder relationships, as proposed in Chapter 8 of King III, are then discussed.

King III principles on stakeholder relationship management

The six stakeholder relationship management (SRM) principles, proposed in Chapter 8 of the King III Report are (Institute of Directors, 2009, pp. 100–104):

1.
The board should appreciate that stakeholders’ perceptions affect a company's reputation.
2.
The board should delegate to management to proactively deal with stakeholder relationships.
3.
The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interest of the company.
4.
Companies should ensure

Research design

The research approach adopted was qualitative, using in-depth, personal, face-to-face interviews. The interviews were conducted in and around Johannesburg, Tshwane, Cape Town and Durban. Qualitative data analysis was used by employing (Tesch, 1990, pp. 142–145) and the software package, Nvivo. Interviews were recorded by dicta-phone and then transcribed. A reflective diary was kept during the interviews to support of the trustworthiness of the data.

Sampling design

Non-probability convenience or purposive

Firmagraphic profile

Companies from various sectors and industries were represented in the research. Table 3 indicates that six of the top performing companies were listed on the JSE (Johannesburg Securities Exchange) Social Responsibility Index.

Senior public relations professionals’ views on PR

PR was generally defined as the management (which included messages and channels) and facilitation of communication (through leadership communication, communication integration throughout the organization and through providing advice and support), with the use of research

Conclusion

The King III Report on Governance for South Africa, in particular Chapter 8 on Stakeholder Relationship Management, holds important implications for PRP's not only in South Africa, but also internationally. An understanding of these implications and the important role PRPs have to play in assisting companies with their corporate governance efforts through stakeholder relationship management among PRPs is critical as it requires not only PRPs, but the field of public relations to make the

Limitations and suggestions for future research

The sampling process in the Durban region was challenging. Not many companies met the sampling requirements as they did not have a PR department or in some extreme cases did not practise PR. Suggestions for future research include repeating the research among non-profit organizations, NGO's and government departments in South Africa. Given the global importance of corporate governance to ensure organizational sustainability, repeating the research in other countries may yield interesting

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View full text

Do public relations professionals understand corporate governance issues well enough to advise companies on stakeholder relationship management?

Highlights

Abstract

Introduction

Section snippets

Research question

The management of stakeholder relationships

King III principles on stakeholder relationship management

Research design

Sampling design

Firmagraphic profile

Senior public relations professionals’ views on PR

Conclusion

Limitations and suggestions for future research

Long Range Planning

A stakeholder framework for analyzing and evaluating corporate social performance

The Academy of Management Review

Research design: Qualitative quantitative and mixed methods approaches

Corporate responsibility: The communication challenge

Journal of Communication Management

The stakeholder theory of the corporation: Concepts, evidence and implications

Academy of Management Review

Top performing companies incorporating the public sector

Strategic management: A stakeholder approach

Current trends in corporate communication

Corporate Communications: An International Journal

Involving stakeholders in developing corporate brands: The communication dimension