Overlaps between Socio-Political Scanning and Stakeholder Management

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3.2.3. Overlaps between Socio-Political Scanning and Stakeholder Management

The last intersection when we go around the circle (Figure 5) concerns the players and the rules of the game.

Just as for the previous subsection, I will navigate through different structural dimensions of the socio-political scanning; and link them successively to different elements of my non-market stakeholder typology (see Section 2.2.1).

Not surprisingly, I start investigating the links between regulations and various categories of stakeholders. These relations are indeed of paramount importance when it comes to lobbying activities.

Which stakeholders are able to amend a specific regulation? I am addressing here the decision-maker stakeholders, namely governmental actors and regulatory authorities according to my typology. “Public policy is formulated through elected representatives who pass laws and through regulatory and administrative agencies that promulgate rules and regulations to interpret and enforce those laws.” (Sethi, 1982)  This being said, I need to be more specific:

What is the underlying distribution of powers between those decision-makers? In order to perform an effective lobbying, it is absolutely necessary for a company to have a clear understanding of the decision-making processes and individual responsibilities, in order to pull the right levers. Concretely, this may be done through “power maps” for example.

Which stakeholders are impacted by a specific regulation? This question is important and allows avoiding a common-error. Lobbying activities should not only focus on decision-makers, but also take into account a broader range of stakeholders impacted by the regulation. This

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includes communities, NGO’s and even business stakeholders such as competitors within the industry. Since those actors are all impacted by the regulation, they might be willing to influence on it as well. This leads to new questions: Who are the most influencing actors? What is the balance of power? What levers can be pulled? It goes without saying that some of those actors will probably defend a similar line; some others the opposite one. In this context, multinational companies need to find influencing supports to turn the balance of power in a more favorable way. This is the heart of “coalition building” (Sethi, 1982).

The case of Shell in Peru illustrates the articulation between the two previous paragraphs. In the 1980’s, Shell only focused on its relations with decision-makers, namely the successive governments of Fernando Belaunde and Alan Garcia. The company did not try to find allies when negotiating contracts and pushing regulations, while strong opposing forces were operating among the social and environmental organizations. This was a total failure for Shell.

Learning from this mistake, Shell came back in the 1990’s with the strong intention of changing the balance of power to its advantage. On the one hand, this meant reducing the opposing forces, as already seen. On the other hand, which interests me more here, this implied strengthening Shell’s position using the support of influencing allies. To do so, the company collaborated for instance with the Smithsonian Institutions to carry out an independent impact assessment of its activities on the local biosphere, in order to find some solutions toward minimum negative impacts. The expertise of this US organization in the area of biodiversity was a world reference, which gave it a strong standard-setting authority all around the world. Thanks to this partnership, Shell could consequently exert better leverage effects than alone. Similarly, Shell worked hands in hands with the global NGO Pro-Natura.

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Let me consider now the rules of the game in their broadest sense as depicted in the typology:

that is to say the formal institutional settings and informal culture.

How do the structural non-market configurations predispose the relationships with stakeholders? From this large interrogation, I could derive many specific questions which should help multinational companies better interact with their stakeholders. I selected two of them and elaborate further below.

To what extent is the scanning of formal institutional settings useful when dealing with Governmental actors?

In the literature review, I mentioned a study by Hillman and Keim (1995) and promised to dwell on it later. So here we are, since the argument of this study gives good basis to answer the question: “We contend that differences in business-government relations across countries can be better understood by examining the institutions through which business and government interact.” (Hillman and Keim, 1995) We have here a clear linkage between the scanning of institutional settings and the manners to deal with governmental stakeholders.

Throughout the years Shell was involved in Peru, successive governments were in power. The 1980’s marked the return of democracy; still, the weakness of institutions needed to be taken into account by Shell when dealing with the government. This link between the institutional settings and government relations could have been even more relevant to assess in the late 1990’s. For the record, it is the time when Shell was getting bogged down in contractual disagreements with the government of Alberto Fujimori. Instead of withdrawing from the project in 1999, Shell could have better anticipate that the government would not have power

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the President Alberto Fujimori to run abroad in 2000. Shell could have attempted to slow down the negotiation process in the hope that the next Government would be more flexible.

To what extent is the scanning of informal cultural constraints useful when dealing with local communities?

The point here is that a good understanding of informal cultural differences, so called

“cultural-cognitive” differences (Vences and Orr, 2008) helps multinational companies better interact with their stakeholders, for example the local communities. I can also state this point the opposite way: inappropriate interactions with stakeholders are often a result of cultural misunderstandings between the company and its stakeholders. That is exactly what happened in a first instance between Shell and the indigenous communities in Peru. In its willingness to do well, Shell first thought that providing some infrastructures to connect the indigenous communities with society would be something valuable and appreciated. This was without understanding that, on the contrary, indigenous communities were voluntarily isolated; the basis of their life was misunderstood.

In sum, this type of cross-analysis regarding the overlaps between the configurations of the game and the players would allow multinational companies being more efficient when dealing with stakeholders; conversely they could better change the configurations of the game using the right players.

I proceeded to similar reasoning with the three interfaces explored so far. With such superimposed approach, multinational companies could better exploit the current game, and better change the game.

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3.3. Second Step of My Model: Superimpose the Multiple Layers of the