8. Secondary Stakeholders: The Government,
the Media, and Non-Governmental Organizations
• Secondary stakeholders were defined as those groups or entities that have an indirect
impact on the company’s survival and strategic activities.
Government Regulation
• Two ways that the government can regulate companies:
o First, government regulation itself can create the conditions that make competition
possible whereby companies can expect to be dealt with ethically.
o Second, the government can also create regulation to force companies to behave
ethically or to engage in corporate social responsibility.
o Three main regulatory aspects:
▪ First, governments can mandate transparency in related-party transactions.
▪ Second, regulation can also hold company executives liable for self-dealing
transactions.
companies for mismanagement.
• Enforcement of contract: Expectation that the terms and conditions of a contract will be
respected.
• Two types of government regulation:
of company actions are thought to be undesirable.
o Social regulations are aimed at improving the lives of individuals in society.
Government Regulation and Company Political Activity
• Institutional theory argues that the government is a key constituent in modern society
forcing companies to adopt government mandate as a way to seek legitimacy.
• Why do companies seek legitimacy by adopting government mandates?
o First, such behaviors reduce the need for managers to decide what is appropriate.
• Corporate public activity (CPA) refers to the attempt by a company to influence or
manage the political entities and the government.
o CPA includes activities such as lobbying, campaign contributions, operation of a
government relations office, and contributions to industry trade groups.
• Reasons for companies to engage in CPA:
The Media
• The media refers to the many avenues of information such as newspapers, television, and
the Internet.
• Some understanding of how the media can influence the public about businesses:
o First, the media can affect the public’s attitudes and behaviors simply by increasing
• The third-person effect basically implies that people exposed to the media generally think
that such messages have much greater influence on others than themselves.
o When applied to business ethics, the third-person effect occurs when:
Media Analysis and Business Ethics
• Media analysis occurs when companies routinely scan the media to discover what is being
said about them.
• Three forms of media analysis:
o Salience and sentiment analysis: the number of times companies are mentioned
and whether they are portrayed positively or negatively.
• Media analysis should encourage companies to do the following:
o Reinforce strong company messages
o Address negative information
Non-Governmental Organizations
• Non-governmental organization (NGO) is an umbrella term that includes special interest
groups, activist groups, social movement organizations, charities, religious groups, protest
groups, and other non-profit groups.
NGO Strategies
publicity or material damage strategies such as boycotts.
• Three levels of NGOs’ indirect influences on companies:
o First, target primary stakeholders such as customers and employees.
• NGO questionable practices:
o Distorted communication
NGO Management
• A company is expected to conduct:
o Stakeholder identification—which NGOs currently have impact for the company?
o Stakeholder prioritization—which stakeholders have a combination of power,
legitimacy, and urgency?