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2. RELATED WORK - Manchester Business School

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2. RELATED WORK - Manchester Business School Powered By Docstoc
					 WHEN NOT ALL NORMATIVE STAKEHOLDER’S
  CLAIMS ARE LEGITIMATE: INSIGHTS FROM
 BAA MANAGEMENT OF LOCAL COMMUNITIES


                                    Nuno Gil

Manchester Business School, The University of Manchester, Booth Street West,
Manchester, M15 6PB, UK, Email: nuno.gil@mbs.ac.uk, tel: +44 (0) 161 3063486




                                        1
  CLAIMS ARE LEGITIMATE: INSIGHTS FROM
 BAA MANAGEMENT OF LOCAL COMMUNITIES
                                         Abstract

This study examines the practice of managing claims from normative stakeholders by
looking at the relationship between an infrastructure promoter and local communities.
The setting is a new airport terminal development by British Airport Authority (BAA).
The findings suggest that initiatives to mitigate the construction impacts to local
communities respond to legal obligations and instrumental purposes but fail to outweigh
conflicting interests. This, compounded with disagreements about the moral obligations
of the firm, perpetuates stakeholder animosity. The findings also suggest that not all
claims from local communities are legitimate. The study discusses three approaches to
manage claims, and the tones of their enactment, contingent upon perceived legitimacy. It
suggests that the firm needs to act proactively and show care in the face of foreseeable
legitimate claims, it needs to react rapidly and apologetically to actual legitimate claims,
and it needs to be assertive but respectful when claims are perceived as illegitimate.



Key Words: claim legitimacy, local communities, normative status, stakeholder
               management




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1. INTRODUCTION
While scholars have long discussed issues of stakeholder identification and categorization

(e.g., Freeman 1984, Clarkson 1994, Mitchell et al. 1997, Rowley and Moldoveanu

2003), and the ethical and economic reasons for stakeholder management (e.g., Jones

1995, Frooman 1999, Hillman and Keim 2001, Orlitzky et al. 2003), fewer empirical

studies are available about managing stakeholders. We induce theory about this practice

by looking in-depth at the relationship between a private infrastructure firm developing a

major asset and the local communities. This serves as a proxy for the relationship

between the firm and non-shareholder stakeholders. To maximize the wealth of

shareholders, the infrastructure firm wants the asset to be delivered as economically as

possible. To build a favorable public reputation, i.e., a positive perceptual representation

of past actions and future behavior (Frombun and Shanley 1990), the firm must show it

cares with the well-being of the local communities and the environment.

    Our research setting is the £4.2bn (2006 prices) Terminal 5 (T5) programme to build

a fifth terminal campus at Heathrow, the most congested airport in Europe. Heathrow is

privately owned by British Airport Authority (BAA). The criticality of managing the

relationship between BAA and the local communities was clear from the onset of T5:

   “We greatly appreciate the tolerance of the communities around the site towards us. We put
   a high value on our relationship with our neighbours. For a construction programme of this
   size, there will always be some impact, but we are doing everything possible to minimize
   this impact on the community. Whenever there has been complaints, we’ve tried to resolve
   them, and will continue to do so” (Construction director 2003)
The empirical analysis draws on stakeholder theory built upon the fairness principle,

which states that a person or group who has accepted the benefits of a cooperative

scheme is bound by a duty of fair play to do his part and not to take advantage of the free




                                               3
benefit by not cooperating (Phillips 2003). An infrastructure promoter reaps economic

benefits from developing a new asset, but its construction impacts the local communities.

Some impacts are positive, e.g., better transportation accessibilities, renewal of derelict

areas, but others are negative, e.g., noise, air pollution, lorries crossing residential areas.

This makes local communities a normative stakeholder relative to the infrastructure

promoter, i.e., one “to whom the firm has a moral obligation, an obligation of stakeholder

fairness, over and above that due other social actors simply by virtue of their being

human” (Phillips 2003 p. 124).

    Our findings suggest that conflicting interests between the firm and local

communities make it hard to build and sustain a positive mutual relationship. A number

of initiatives help to mitigate the nuisances that construction causes to local communities,

but cannot eliminate all of them. The principle of fairness suggests that the promoter is

morally obliged to compensate the local communities. The promoter may also be legally

obliged, and strategically interested, to do so. Disagreements, however, are likely to

subsist about whether the firm’s actions indeed fulfil the legal obligations and manifest

social responsible behaviour, since some matters are subjective.

    Less intuitive, our study shows that not all claims from the local communities may be

morally legitimate. While legitimacy is relative to people (Giugni 1998), this highlights a

key issue: a normative status of a stakeholder does not offer a guarantee that all claims

put forward by that stakeholder will be legitimate. This matters to stakeholder

management. While the firm needs to listen to normative stakeholders because they affect

its performance and continuing survival (Clarkson 1995, Mitchell et al. 1997), not all

claims ought to elicit the same level of response. Specifically, this study uncovers three




                                              4
approaches to manage stakeholder claims  proactive, assertive, and reactive  and

characterizes the tones, i.e., the attitude manifested by the manner of speaking, choice of

words, and phrasing, accompanying the enactment of the responses. The findings

corroborate recent suggestions for scholars to look at stakeholder salience as a triplet

between stakeholder power, claim characteristics, and power of the firm (Eesley and

Lenox 2006). In doing so, theory can help firms improve the fit between their actions

with stakeholder expectations (Brammer and Pavelin 2006) and influence capacity

(Barnett 2007).

    The remaining of this paper is structured as follows. After reviewing related work

and positioning local communities as a normative stakeholder (§2), it describes the

research methods and site (§3). It then analyses the BAA initiatives to manage the claims

from local communities, and their implementation (§4). After summarizing the insights

(§5), the paper discusses the limitations (§6), and implications to theory and practice (§7).

2. RELATED WORK
Stakeholder theory is a theory of organizational management and ethics that puts morals

and values as a central feature of managing organizations (Freeman 1984, Carroll 1989,

Donaldson and Dunfee 1994). It argues that firms should pay attention to the interests of

non-shareholder stakeholders, while pursuing the maximization of shareholders’ wealth.

A major issue underpinning extant theory asks whether it is legitimate for the firm to

spend time and resources with groups or individuals who are not equity shareholders, or

stated differently, ‘who are the stakeholders?’ (Freeman 1984). Early work defines

stakeholders as “any group or individual who can affect or is affected by the achievement

of the organization’s objectives,” including financiers, employees, customers, suppliers,

and communities (Freeman 1984).


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    Subsequent work has added depth to this concept. Normative scholars suggest that

moral legitimacy is an essential condition of stakeholder status (Clarkson 1994,

Donaldson and Preston 1995), whereas other scholars argue that such conceptualization

may leave out powerful constituencies (Mitchell et al. 1997, Jones and Wicks 1999). In

particular, Mitchell et al.’s (1997) theory of stakeholder identification and salience

categorizes stakeholders in function of the legitimacy of their claims, power, and

urgency. This framework manifests an instrumental view of stakeholders  or managerial

(Donaldson and Preston 1995)  in recommending the firm to pay attention to those that

can affect the accomplishment of its goals. Yet, the framework does not determine who

the legitimate stakeholders are, regardless how powerful they are to affect the firm.

    More recently, Phillips (2003) introduces the principle of fairness in stakeholder

theory. This principle is based on Rawl’s (1964) notion of fair play underlying a theory of

justice. It states that when people are engaged in a cooperative scheme requiring sacrifice

or contribution on the participants, and the benefits of this scheme are accepted,

obligations are created on the part of the group in proportion to the benefits accepted.

Reciprocity means that where a firm has an obligation to a stakeholder, the latter has an

obligation to the firm (Phillips 2003 p.92). What matters is the obligating act itself, not

the content of obligations because the latter varies according to the context of the

interaction between the firm and stakeholder (ibid.).

    This approach integrates the moral philosophical conception of stakeholder

management theory (Freeman 1984, Donaldson and Preston 1995, Jones and Wicks

1999) with the pragmatic, power-based, strategic conception (Mitchell et al. 1997, Wicks

and Freeman 1998). Stakeholder status derives from the indication of some additional




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moral consideration from the firm over and above that due all humans as humans

(Phillips 2003 p.94).(1) Further, Phillips distinguishes between normative and derivative

stakeholder legitimacy. In contrast to the definition of normative stakeholders presented

upfront, derivative stakeholders (e.g., activists, media) are “those groups whose actions

and claims must be accounted for by managers due to their potential effects upon the

normative stakeholders and the firm.” Because this legitimacy does not derive from a

moral stake, derivative stakeholders are not entitled to greater moral consideration in

managerial decision-making or to special obligation to attend to their well-being.


Local Communities: A Normative Stakeholder
Local communities are constituencies characterized by three main factors (Lee and

Newby 1983): geography (people residing physically close), interaction (people regularly

interacting), and identity (people sharing a set of beliefs, values, and experiences).

Research suggests that firms increasingly participate in various civic activities with

groups of neighbours (Altman 1998), and allow institutional pressure from communities

to shape corporate social action (Marquis et al. 2007). In doing so, firms aim to identify

the issues of importance to the communities, and to act upon that knowledge, aware of

the significance of this relationship to the business (Dunham et al. 2006).

    A firm developing a new infrastructure enters into a cooperative scheme with the

local communities after approval of the planning application. Rawls’ (1964) concept of

reciprocity suggests the promoter has fairness-based obligations to the local communities

who will be affected by the construction works. The locals, in turn, also become a

member of a cooperative scheme, although some of them may have opposed to the

planning application. The obligations of the firm may be spelled out as legal obligations




                                             7
in the planning conditions, even if they are also a question of fairness. It is fair that the

firm keeps the communities informed about nuisances that construction will cause; takes

actions to mitigate them; and compensates the communities. These obligations make

local communities a normative stakeholder relative to the promoter. Local communities,

in turn, have an obligation of fairness to not exploit opportunistically this relationship.

    Aside from what is a legal obligation, much is left to the moral discretion of the two

parties in managing the relationship. The principle of stakeholder fairness provides a

moral basis for directing this discretion. We next investigate what it means for the

promoter to be fair to the local communities, and vice-versa, in the T5 context.

3. RESEARCH METHOD
The research method is a single-setting case study with multiple embedded units of

analysis (Yin 1984, Eisenhardt 1991). The uniqueness of the Terminal 5 programme

underpins our rationale for conducting an embedded single-setting research study (Yin

1984). As put by Flyvbjerg (2001 p.78): “atypical or extreme cases often reveal more

information because they activate more actors and more basic mechanisms in the

situation studied.” Specifically, the conflation of three conditions makes the relationship

between BAA and local communities paradigmatic of the practice of managing claims

from a normative stakeholder: First, BAA is a commercial firm under pressure to

improve business performance and control the T5 programme costs. BAA must scrutinize

requests to invest in the public interest as part of its obligation to maximize shareholder

value. Second, BAA needs to demonstrate to the regulator that it cares with the public

interest given its monopolistic ownership of the three major London airports. The

preservation of this monopoly is contested by many actors who argue BAA has failed to

meet the public interest. If BAA ignores the concerns of the local communities,


                                              8
oppositionists can use that argument in lobbying the regulator to call for the government

to break up the monopoly. And third, BAA has manifested interest in expanding

Heathrow after the government published the White Paper The Future of Air Transport in

2003. This report concluded that there was a case for constructing a third runway

provided environmental impacts could be reduced to acceptable levels by 2015/2020.

Most local authorities have opposed any further plans to expand Heathrow, and

threatened to take court action if the plans go forward. If BAA disregards the well-being

of the local communities during T5 construction, it would add legitimacy to the local

authorities’ stance, and encourage the government to be very strict with planning

applications BAA may submit in the future


Data Collection
The fieldwork lasted from mid 2004 until mid 2007 as part of a broader research

programme. At the core of the empirical database are the minutes of the twelve Local

Focus meetings held between 2003 and 2005 and the minutes of the meetings of the

Heathrow Airport Consultative Committee (HACC) (held every six weeks). The Local

Focus meetings were attended by representatives from the residents’ associations, as well

as representatives of BAA. The HACC meetings were a public forum to discuss matters

concerning the development and operation of Heathrow airport, attended by a greater

number of stakeholders (e.g., Local Authorities, Resident Associations, London

assembly, Environmental Groups) and BAA senior administrators. We triangulated this

data against information gathered through 80 face-to-face interviews, observations on

site, and analysis of documents, including clips from the T5 press (The Site), local press




                                            9
(Airwaves, Heathrow People, Skyport, Hillingdon Times), web sites of the Local

Authorities, T5 planning application, T5 newsletters, and BAA programme procedures.


Research Setting: The T5 Programme
BAA submitted the planning application for T5 in February 1993. The application was

called in by the Government for its determination, and the public inquiry started in May

1995. T5 affected over 260 hectares, and included: (1) the construction of three concourse

buildings, a 4,000 space car park, and taxiways to serve 60 new aircraft stands; (2) the

diversion of two rivers; and (3) the excavation of 13.5km of tunnels. At the peak of

construction, BAA expected 4,000 workers to turn up daily on site. A number of local

authorities formed a consortium opposing to the planning application, albeit the latter

ruling out the need to construct a third runway (‘it would have such severe and

widespread impacts on the environment as to be totally unacceptable’). These local

authorities argued that T5 would reinforce the pre-eminent position of Heathrow and

increase the pressure to provide more capacity. The public inquiry concluded nonetheless

that the benefits would outweigh the environmental impacts, if the effects were properly

controlled. The government accepted the recommendations of the inspector, and

approved the planning application in November 2001, subject to 690 planning conditions.

The inspector also noted that “it was right to rely on the assurances given by BAA, a

publicly traded company, to control the widespread impacts of construction works to the

environment.” Table I summarizes the BAA legal obligations during T5 construction.

    ---------------------------

    Insert Table 1 about here

    ---------------------------------




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Construction of T5 started in 2002 with a target opening date in March 2008. In the

spring 2002, the government launched a policy consultation about whether Heathrow

capacity should be increased by adding a third runway. BAA’s position was that “we will

not be lobbying for any options, but will provide as much information as possible to the

Government in order that when a decision is made, it will be the correct one”. This

position led a local resident to protest “we feel there may be a hidden agenda in that not

only may there be a short Third Runway, but also increased airport facilities necessary to

serve this”. In 2004, BAA launched a consultation about schemes to deal with the

problems of blight and noise in response to the government’s recommendation for BAA

to safeguard land for a further Heathrow expansion around 2015-20. We next examine

BAA’s effort to moderate the animosity of local communities during T5 construction.

4. ANALYSIS
We start the analysis by investigating the aim and objectives underscoring the initiatives

launched by BAA to gain community support during T5 construction (summarized in

Table 2). We then examine the stance of the project teams, BAA senior administrators,

and local communities relative to these initiatives. We also examine how BAA prioritized

attention to the different claims, as well as the legitimacy of the claims.

---------------------

Insert Table 2 about here

-----------------------------------




Combining Legal Obligations and Strategic Purpose
Our findings reveal three main BAA actors influencing the relationship with the local

communities during T5 construction: community liaison and environment teams, project


                                              11
teams, and BAA senior administrators. The first group aimed at ensuring effective

communication with the local communities. As put by the community liaison manager

(2005): “Keeping people informed about what is happening is more than half the battle in

keeping them reasonably content - eliminating the surprise element is the key.” The

community liaison team hosted open site events and site tours, ran the Local Focus

meetings and community hotline, published the newsletter, and took the T5 exhibition

around different communities. The environment team run the monitoring programme, and

ensured that the project teams were protecting the local water courses, and implementing

the biodiversity and landscape strategy. Further, both teams were responsible for meeting

local people upset with specific issues, understand the situations, and find solutions:

   “Initially, we had residents complaining of dust in their windows, in their washing, there
   was common anger that tends to escalate. In those situations, we would be out there
   meeting residents very quickly. That has a huge effect to diffuse their anger, to avoid that
   they call the local newspaper and then we would get an angry mob. They also become
   more sympathetic with what we are trying to achieve.” (Community liaison manager 2007)
The work of these teams not only fulfilled a legal obligation, but also helped BAA to earn

the trust and respect of the local communities. This was especially important whenever a

project team requested a local authority to relax the application of a planning condition:

   “Due to bad weather, the project requested us 24 hour working to hit a critical milestone.
   Before going to the local authorities, we assessed the noise impacts and asked the local
   communities: ‘what do you feel about this if we put mitigation measures in?’ Their main
   concerns were the headlights of the trucks and the noise of the reverse beepers. We
   proposed to work in a circular way and deposit the material away from their homes, and
   this eliminated a lot of possible conflicts” (T5 environmental manager 2007)
BAA’s efforts to communicate its environmental concerns to the local communities  a

key attribute to build a favourable public reputation (Bromley 1993, Buysse and Verbeke

2003), as well as retain good employees and attract investors (Carter 2006)  were


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notorious. This passed by writing in the newsletter about fishing, mussel-collecting and

riverbed silts-relocation activities associated with the diversion of the Twin rivers(2), and

using a double-decker bus to support house displays about these practices.

    A second group of initiatives aimed at making the project teams aware of BAA legal

obligations and the need to behave accordingly. This was bluntly stated by the

environment team manager (2003): “Environment has to be part of everyone’s day-to-day

decision making and not just my team’s responsibility.” These initiatives included, for

example, using the monthly Team Talk Pack to stress the importance of complying with

fuel storage and discharge regulations. Likewise, the environment team used the site

newspaper to alert that spills of oils and chemicals were in danger of spoiling T5’s eco-

friendly reputation: “Basically, we’re doing a lot of good work here environmentally, but

are letting ourselves down on things like housekeeping and waste management…there are

proper facilities all over the site for all kinds of waste to be disposed of properly, so

there’s no excuse for not doing it” (June 2005). In a third example, the induction booklet

given to all workers stated: “Whether you travel by public transport, walk, cycle, drive

your own car or car share with others, please be mindful that you are entering a highly

residential area. Ensure you use only those dedicated areas made available for parking.”

       A third group of initiatives reinforced the strategic long-term relationship between

BAA Heathrow and the local communities in terms of employment opportunities. The

local labour strategy acknowledged that around Heathrow there were areas of deprivation

as well as a shortage of construction workers. An economic development manager

(‘typically a public sector job’ in his own words) was responsible for implementing the

strategy and integrating it into the activities run by BAA Heathrow. Strategy




                                             13
implementation included initiatives such as: 1) a construction educational centre to

educate 14 to 16 year olds; 2) a construction training centre based in T5 to provide

apprenticeships in the 16 to 22 age bracket; 3) a bursary scheme to support young people

to go to construction related university degrees; 4) an annual Meet the Buyers event to

give local companies opportunity to meet T5 suppliers; and 5) the Heathrow employment

forum, a body acting as a job-brokerage for T5 and Heathrow. Aware of its need to

demonstrate operating in the public interest, BAA lobbied the government for T5 to be

the venue chosen by the Secretary of State for Education and Skills to launch a White

Paper on the country’s skills reforms in 2005. The T5 project director would later note

that “It’s great to see T5 and Heathrow being given this kind of recognition. Investment

in construction training has been neglected in previous years – an issue we’ve worked

hard to redress with Terminal 5.”

    The fourth group of initiatives did not meet a legal obligation, neither involved

corporate money. Rather, it manifested goodwill to help the local communities, built

upon employee voluntarism and fundraising. Here, we include the donations to local

organizations funded by money raised by the T5 charity. The charity met every three

weeks, and set a maximum donation of £2,500, such as to help pay for a number of park

benches and picnic tables, and the renovation of a scout’s hut. Admittedly, this initiative

also encouraged T5 people to work together and have fun, which helped with team

building and moral. We next examine the practice of implementing these initiatives.


Resolving Internal Conflicts
The implementation of a stakeholder approach can generate internal conflicts with the

economic objectives of the firm, which require the attention of senior management if the




                                            14
approach is to succeed (Weaver et al. 1999). Our findings confirm theory. While the

community liaison and environment teams recommended ways to respond to claims, the

actual response was part of the remit of the project teams. Internal conflicts aroused when

the latter, operating under incentives to meet cost targets, challenged the

recommendations. The liaison team manager observed:

  “In the early stages, we had to work really hard to convince the projects of the benefits of
  working with the community since in a lot of construction projects, you go in, you build
  and you leave, whereas here we were looking into a long term partnership.”
This was the case, for example, of recommendations for building a temporary bridge and

road to circulate trucks moving soil (to free local roads), using vibration methods when

driving sheet piles (to reduce noise), and using ultra low sulphur diesel in the machinery

on site (to reduce emissions). Whenever hard data was available, community liaison and

environment teams would use it to attempt to persuade teams that they would need to act

upon, as the environment manager illustrated (2007):

  “At some point, the dust levels indeed increased, and that is where monitoring programs
  are most helpful. Monitoring gave us the power to raise the warning, and ask project teams
  to review the mitigation measures, change the routes of some deliveries, and increase the
  frequency of damping down the roads.”



When the teams failed to persuade the project leaders that these were worthy investments,

they escalated the conflicts to the BAA administrators:

  “BAA wouldn’t want the adverse media attention; we want to be a responsible neighbour.
  When we look at these alternatives, and some are more costly indeed, we have to justify the
  costs on everything, but we justify because this is an opportunity to demonstrate we can
  build a terminal with minimal impact on the communities.” (Environment manager 07).
In contrast, there were less tensions between the economic development manager, the

project teams, and BAA administrators since the employment-related initiatives were



                                              15
delivered jointly with public agencies and other firms. The economic development

manager explained (2007):

    “This [labor strategy] is about how to make these resources work together to achieve
   something that individually none of us could achieve. It is about identifying opportunities,
   where objectives of organizations overlap and leveraging that to make things happen.
   There is a lot of funding coming from elsewhere. This makes it a compelling business case
   for BAA. It is not just spending money on our own.”
The economic development manager acknowledged that the overhead from implementing

the labour strategy was fairly modest relative to the reputation benefits it generated to

BAA, particularly in the public sector world (‘they are all looking to T5, to the things we

tried, and try to extract lessons from that’). We next discuss the management of external

conflicts between BAA and the local communities.


Resolving External Conflicts
The analysis of the minutes of the meetings involving representatives from BAA and

local communities provides an unbiased look at this relationship (summary in Table 3).

The minutes suggest that local people appreciated the efforts of the community liaison

team to listen to their claims (‘they do their best’), but could be frustrated with the time

BAA would take to resolve the issues affecting their well-being. This led them to

conjecture that project teams were not paying enough attention to the community and

environment teams (‘perhaps T5 doesn’t listen to them’):

   “The local communities have not been treated with respect on the entire issue surrounding
   the construction of T5. The villages have suffered immensely during the construction
   period in 2003 relating to noise, dust, and intrusive lighting with inadequate advance notice
   given to the residents on some forthcoming works’ (Chair of Residents Association 2004)
-----------

Insert Table 3 about here



                                                16
Comprehensibly, some of the legitimate issues raised by the communities (noise, dust)

were difficult to resolve quickly in face of the organizational complexity of the T5

programme. Yet, the analysis of internal conflicts also suggests that the implementation

of recommendations from the community liaison/environment teams could be a

protracted process. Further, the findings suggest that the T5 teams went through a gradual

learning experience. While residents complained about fly parking and T5-related traffic

circulating through residential areas from the onset, for example, BAA only asked

residents to take note of the registered plates in 2004. Likewise, BAA failed to anticipate

that a vast proportion of the workers would require temporary accommodation. This led

to problems with unauthorised caravan sites that could have been avoided otherwise.

    Other claims generalizing BAA behaviour could be unfair if they were grounded on

an one-off event, or the legitimacy of the claims could be difficult to assess objectively

since most legal obligations were not prescriptive (was the hotline reasonably staffed as

BAA argued, or understaffed as some local residents argued?). Thus, rather then trying to

judge whether BAA met its legal and moral obligations, our analysis focuses on

uncovering the approaches employed by BAA to manage the stakeholder claims in a

hostile environment (“BAA purely looks to get more money for their shareholders”).

    Most claims relating to noise, fly parking, traffic congestion, and illegal caravan

parking were unarguably morally legitimate. In these circumstances, BAA would

reactively involve senior managers who used an apologetic tone while stressing that BAA

was working hard to mitigate the impacts (e.g., episodes in Jan, March 04 in Table 3). As

put by the T5 programme director when attending a Focus Forum meeting: ‘Matters




                                            17
raised here will be taken seriously and whilst demonstrably performance to date has been

frustrating to the residents, I will do whatever necessary to follow the issues up.’

    In a second approach, BAA sought to be assertive about what local communities

could realistically expect when it perceived the claims were not legitimate. The tone

would be respectful (e.g., episodes in Jan, July 04 in Table 3). For instance, BAA

representatives tried to avoid creating expectations that the nuisances would simply go

away (‘this incident [worker using pneumatic drill at 4.00am] was clearly unacceptable,

but no guarantee can be given that this sort of thing will never happen again’). BAA

could also be assertive when it felt that a claim was legitimate but unfair relative to its

efforts to meet the legal obligations; or when a claim was unrelated to T5 denoting

instead an opportunistic attempt to exploit the privilege relationship with BAA.

    In a third approach, BAA was proactive in the face of foreseeable legitimate claims

that the local communities could put forward (e.g., episodes in Jun 04, July 05 in Table

3). The tone would be caring. BAA understood that requests for the local authority to

relax the application of a planning condition could be badly accepted by the local

communities. Accordingly, it would consistently try to proactively win the understanding

and support of the residents associations before submitting the request.

Are the Claims of Local Communities always Legitimate?

Our fieldwork uncovered a number of instances suggesting that the claims of the local

communities were not always legitimate (‘people try their luck’). These situations were

difficult for BAA to resolve, especially if it did not have data to demonstrate that the

construction works were not the cause of a reported nuisance. The concern for BAA was

twofold. On one hand, it wanted to avoid the bad press that a localized situation could




                                             18
create. Firms are more likely to become concerned with public reputation when they

anticipate situations that can threaten their image (Bromley 1993), since reputation is

determined by the signals that the public receives concerning the firm behaviour

(Fombrun and Shanley 1990). This is particular so for firms constantly under the eyes of

the media (Wartick 1992, Carter 2006). On the other hand, BAA wanted to signal that

willingness to compensate local people was not an ‘open checkbook.’ As explained by

the environment manager: “From a BAA perspective, you need to be careful about how

far you want to go; neighbors talk “BAA helped me to get £200’, and then the next

person says ‘I need £500 because my car is filthy due to your project,’ but the project

may have nothing to do with it.” The resolution of these claims involved tact and good

judgment. It also involved combining an assertive stance with a respectful tone, as the

environmental manager illustrated (2007):

  “A lady who runs a nursery for plants 250m away said it was costing her a lot more to
  clean the glasses. This was a difficult one because we did not have baseline data on her
  place, but data on the vicinity didn’t show even a marginal increase. We thought the way
  she was going was that she wanted a lot of money to pay for cleaning the green houses. So
  it may sound patronizing, but we talked with her, showed the data, and said “we understand
  your concerns, but we do not believe we are having an impact as far as dust is concerned.”
Other situations involved people complaining that they had got a chip on their screen or

that they had skidded when they were driving around T5 because there was mud on the

road. In the absence of data proving one way or another, BAA gave the claimant the

benefit of the doubt and treated the event as a possible result of T5 if the compensation

was limited. However, when a resident asked BAA to buy her house because of

difficulties in selling it after T5 construction started, BAA refused to avoid creating a

precedent that could be costly to the business. Instead, the community liaison team took




                                              19
the landscape architect to the resident’s home to describe the tree screening that would be

there in the future, and suggested that the resident explained that to potential buyers.

Do BAA Practices Manifest a Sense of Moral Obligation?

Because most legal obligations for BAA related with T5 were not prescriptive, it

becomes difficult to state whether BAA did the least required by law and social

expectation, i.e., acted as a defensive firm (Clarkson 1995), or went beyond compliance

with legal requirements as it felt morally obliged to further some social good, i.e., acted

as an altruistic firm (McWilliams and Siegel 2000). The initiative denoting a greater

sense of moral obligation was the registered T5 charity. Charity donations are a form of

demonstrating social responsibility (Brammer and Pavelin 2006). The aim of the T5

charity was not significantly different from that typical of corporate charities: using

donations as a vehicle to improve visibility and develop social and environmental

influences (Brammer and Millignton 2004). The donations helped to build a positive

reputation for the T5 team. While the amounts were small, the impacts were high as

typical of discretionary donations above and beyond required activities (Brammer and

Millington 2004). Unlike the other initiatives, however, the T5 charity was run on a

voluntary basis, and the donations came from a pot of money raised by employees. Thus,

the T5 charity manifested moral obligation at the individual level, eventually tied up to

attempts to obtain personal satisfaction or enhance personal prestige (Navarro 1988).

5. DISCUSSION
Our analysis suggests an instrumental and prudential purpose (Jones 1995) informed

BAA’s approach to stakeholder management. One group of initiatives aimed at

mitigating the impacts of construction to the local communities in the short-term, i.e.,

they aimed at ‘cooperation’ (Dunham 2006). Specifically, these initiatives kept local


                                             20
communities informed and gave them an opportunity to express concerns about T5

construction. This helped BAA to develop what Werhane (1999) termed as moral

imagination, i.e., the ability of a firm to place herself in the position of the stakeholders to

anticipate their actions and claims. The initiatives related with employment opportunities

aimed at long-term strategic ‘collaboration’ (Dunham et al. 2006). Further, both groups of

initiatives reflected positive on the firm’s public reputation, produced social output, and

appeared compatible with seeking profit maximization.

    Our findings also uncover delicate nuances in the practice of managing claims from a

normative stakeholder. Local communities have a legitimate stakeholder status, but not

all claims they put forward are necessarily legitimate. We identified three types of

responses to claims and the respective tones accompanying the enactment of these

approaches (summarized in Table 4). A proactive approach is appropriate to pre-empt the

rise of foreseeable legitimate claims. The tone must demonstrate that the firm cares with

the well-being of the local communities. An assertive approach is appropriate when the

firm believes the claim is not legitimate, whether the firm has data to substantiate its

belief or not. Because a negative response can threat public reputation, the tone must be

respectful. A reactive approach is important when the claim is legitimate, and there is a

legal or social expectation that the firm takes an action. In reacting, the tone needs to be

apologetic to acknowledge the legitimacy of the claim. The logical exception was the

caring rather than apologetic tone accompanying the reactive responses to claims put

forward to the T5 charity. Interestingly, we did not find evidence of BAA adopting a

confrontational approach, cognizant perhaps that even if some claims were not legitimate,

it was unarguable the legitimacy of the normative stakeholder status of the local




                                              21
communities. The tone of the long-term collaboration in terms of employment

opportunities was economic, although BAA was good at exploiting it in political terms.

    ----------------

    Insert Table 4 about here

    -----------------

This fit between both the response approach, as well as the tone in enacting the response,

with the characteristics of the claim agrees with Phillips’s (2003) notion of proportional

fairness. The fit is also necessary to dissuade free-riding and align social actions with the

fiduciary responsibility of the firm (Barnett 2007). We next discuss the limitations of our

work, and the implications to management practice and theory.

6. LIMITATIONS
The difficulties to generalize insights from a single setting are the key limitation of this

study (Yin 2003). Admittedly, the terms of the relationship between a monopolistic

infrastructure owner and the local communities may be different from the terms affecting

equivalent relationships faced by other firms, especially non-infrastructure ones. Yet, the

socio-economic evolution toward privatization of infrastructure (Gil 2007) is increasingly

creating natural monopolies that governments need to regulate. This makes us believe

that our research setting is not unique, but rather illustrates a phenomenon that is

becoming critically important for business and society.

    Our study is also limited in the sense it does not cover other important aspects of

managing a normative stakeholder. We next highlight four that merit further research.

First, the wants and interests of local communities do not exist insulated from external

forces. We do not probe into how to manage activist groups targeting corporate firms

(Rowley and Moldoveanu 2003) and influencing local communities. There were a


                                             22
number of activists in our setting (e.g., Hacan ClearSkies, Earth First!, Plane Stupid,

AirportWatch) opposing any plans to expand Heathrow. In 2005, for example, activists

broke into the T5 construction site claiming that BAA was stock piling contaminated

material. In the same year, HACAN ClearSkies chair observed about BAA plans to assist

home owners deal with blight and noise: “The levels of compensation are higher than

before, but BAA’s motives in making the offer must be questioned (…) This is Santa

with a sneer.” Is BAA’s recent decision to support the pro-Heathrow expansion lobbying

group ‘Future Heathrow’ a way to fight in the same terms?

    Second, the management of conflicting claims emanating from within one normative

stakeholder constitutes on its own a complex problem. The environment manager, for

example, faced one heated meeting because some local residents were annoyed that had

not been consulted before BAA chopped down some unkempt vegetation. While some

people demanded the re-vegetation of the area, others argued that the new situation was

much safer. Likewise, some residents complained that ‘BAA cared more about grass than

about us’ after learning about the relocation of the twin rivers ecosystem. Third, the

practice of managing a stakeholder needs to evolve over time (Phillips 2003). Here, the

communities were mainly affected by the early construction works, and it was reasonable

to expect BAA to reduce the level of attention over time. BAA noted, however, that the

exit strategy was hard to implement as residents became used to easy access to senior

managers. And fourth, the study is omissive about how efforts to manage local

communities impact on the firm’s performance. While Berman et al. (1999) found no

significant effects, we conjecture a positive effect may exist in the case of the private

infrastructure sector.




                                           23
7. IMPLICATIONS TO PRACTICE AND THEORY

Our study develops a fine grained understanding of four critical factors in managing

claims from local communities. First, policy matters to transform the moral obligations of

the firm into legal obligations, especially in face of the limits of voluntary action when

coercive regulation is absent (Newton and Arte 1997). Second, senior administrators need

to commit time and effort to set examples of good neighbourhood, to educate and reward

the resource base, and to resolve conflicts. Third, monitoring the impacts of the activities

of the firm onto the eco-human environment is critical to generate data that can lessen the

influence of subjective assessments in the dialogue with the local communities. And

fourth, the firm must communicate determination in working together with the local

communities, and showcase corresponding deeds. Internally, this helps to change the

behaviour of those not accustomed to give additional consideration to local communities.

Externally, it matters to help the firm build trust and gain their respect.

    There are some implications to theory. First, our study empirically confirms Eesley

and Lenox’s (2006) claim that the characteristics of the triplet stakeholder–request-firm

need to affect the firm’s response to a claim beyond the stakeholder status. Further, it

highlights the importance of aligning the nature of the response (proactive, assertive,

reactive) with the correct tone when enacting the response (caring, respectful,

apologetic), an aspect that has deserved less attention in the literature. And second, our

study confirms insights from stakeholder management research using a resource-based

view of the firm. Scholars have argued that effective stakeholder management is more

than just skilful ‘public relations exercise and rhetoric framing’ (Meyer and Rowan 1977)

in response to external demands. Rather, it involves establishing routines, articulating



                                              24
visions, making resources available, and commitment to embed in the firm shared

cognitive and linguistic maps of the relevant environment (Buysse and Verbeke 2003,

Roome and Wijen 2006). These models, redeveloped through internal processes of sense

making, can lead the firm to view the relationship with the stakeholder, and engage with

it, in the ways that are strategically desirable (Basu and Palazzo 2007). Our study

confirms that commitment and communication are necessary so the firm can achieve

congruence between the public discourse and the way it responds to claims. This

contributes to signal the moral consistency necessary for developing robust relationships

(Ciulla 2005), or in the words of a respondent, “It makes local communities feel we are

not just paying lip service to them.”

8. NOTES
   (1) Obligations distinct from the duties. A person cannot be morally disregarded just because
       it does not merit the additional moral consideration conferred by stakeholder status
       (Phillips 2003 p. 117)
   (2) The project won an ‘Excellent’ award in the Civil Engineering Environmental Quality
       Assessment Scheme in 2005.
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                                          29
       Table 1 –Planning Conditions to Mitigate Eco-human Environmental Impacts

(1)    Invest £1.5m in training and education initiatives over the next 10 years
(2)    Bring all bulk material to the construction site by rail;
(3)    Declare and enforce ‘no go’ routes and times for lorries
(4)    Set up a consultative group to liaise with the local people
(5)    Respond to complains within one working day, including provision of phone number for
       people to register their questions
(6)    Issue a regular construction newsletter to keep the community informed
(7)    Run a comprehensive environmental monitoring program and make information available to
       the local authorities
(8)    Set up a 24-hour call-out system to provide emergence response in the event of an
       environment incident
 (9)   Provide equipment for wheel washing on site, and clean site roads
(10)   Transfer rare habitats and species from the T5 site to a suitable area within the locality to
       maintain the biodiversity of the area and offset the loss of areas with ecological interest
(11)   Limit provision of car parking for construction workers to 50% of the total workforce.




                                                 30
                                     Table 2 – Initiatives to Control Construction Impacts and Gain Community Support
  Aim                                           Initiative                   Objectives                                   Exemplar
                                      Open site annual event; Inform about progresses; “OpenSite is a great opportunity for us to explain how
                                      weekly guided tours of T5 be            agreeable        to T5 is being constructed and for people to see for
                                      construction site              residents;                   themselves the magnitude and complexity of work
    Improve External Communication




                                                                                                  being undertaken” (Community liaison manager 05)
                                      Itinerant T5 Exhibition, Show how T5 will look “We hope the new exhibition will encourage local
                                      including maquette, photos, when it opens; share people to come and learn more about the terminal’s
                                      archaeological artefacts       archaeological findings      development” (Design and development director 03)
                                      Local Focus Forum              Liaise with local people, “We don’t always get what we want, but BAA does
                                                                     address          concerns, listen (…) I always report back to my members, and it
                                                                     respond to complaints        helps them understand why certain things happen”
                                                                                                  (Chair of resident association 05)
                                      Newsletter with 10,000 Keep local communities “One of the T5 inquiry commitments was to keep local
                                      copies, distributed four informed                           residents informed about the development as it
                                      times a year                                                progresses. This is part of that commitment” (T5
                                                                                                  inform, issue 1, Summer 02)
                                      Environment         monitoring Collect data to ensure “We are carrying out noise, dust, air quality and water
                                      program        (e.g.,     dust environmental       impacts quality monitoring to provide us with an early warning
                                      deposition stations, noise) are acceptable                  system should things not go to plan” (Environment
                                                                                                  manager 02)
                                      The        Site       monthly Help create a T5 culture “The Site is raw and it's real, there's no management-
Communicatio




                                      newspaper for construction                                  speak, and we try to make it something people really
  Improve




                                                                                                  want to read” ( Site's editor 04)
  Internal




                                      workers
                                      Staff induction programme, Integrate,            educate, “We operate with both carrot and stick. We try to take
      n




                                      training days, awareness motivate project teams             a proactive stance talking to contractors, but also
                                      campaigns                                                   monitor how they          behave” (Community liaison
                                                                                                  manager 04)
                                      Adult training scheme          Provide locally based “We aim to utilise T5 as a vehicle to develop a variety
relationship in terms
 Nurture long-term




                                                                     adults opportunity to of training and education schemes in construction
   of employment




                                                                     qualify as trades people related trades” (Project director 06)
    opportunities




                                      Network      of     vocational Provision       of       80 “”T5 represents one of the most exciting training
                                      training centres               apprenticeships              opportunities in the construction industry.” (T5
                                                                                                  construction director 05)
                                      Teacher Resource Pack to Help local schools benefit “For us, T5 is a local project and therefore of real
                                      assist     with     vocational from       the     learning interest to our pupils, which makes this pack all the
                                      learning                       potential that T5 offers     more useful and relevant” (Local head teacher 05)
                                      T5     registered     charity. Give money to support “We feel that T5 has a responsibility to the local
Good
 will




                                      Organize           fundraising local organizations          community and by helping in this way we are proud to
                                      events                                                      be making a contribution” (Chair of T5 charity 05)




                                                                                      31
                              Table 3 – Summary of Concerns and Complaints Raised by Local Residents and BAA response
Date                    Concerns, complaints from Local Residents                                                                BAA Response
July Many: Coaches using local roads; workers setting up illegal caravan sites; fly- Assertive: “there are ongoing negotiations with council for temporary caravan park and
2003 parking; concerns about cost implications to local authorities arising from               600-bed hostel (…) BAA is exceeding best practices in dust suppression”
       inflow of workers (more needs for policing, health care); dust problems            Reactive: “we will talk to coach operators (…) put directional signage (…) investigate
                                                                                               possible extension of free bus scheme zone “
Sept. Many (unresolved issues): fly parking, T5 related traffic crossing residential Reactive: “we apologize for failing to notify the specifics of a road closure”
2003 areas, dust, caravan sites, ‘24-hour hotline very difficult to get through’, failure Assertive: ‘we’re working hard to eradicate fly parking, traffic issues, and suppress dust
       to notify road closures                                                            (…) plot options have been identified for potential caravan parks”
Nov. Many (unresolved issues): traffic going through restricted zones, ‘Residents Assertive: “most feedback [on hotline] has been positive”
2003 dissatisfied at lack of response to complaints by email to hotline and failure to Reactive: “new service will be introduced prohibiting vehicles no longer working for T5 to
       pick up calls in person’, ‘floodlights from T5 site are a nuisance’                retain T5 identification”
Jan. Many (unresolved issues): traffic problems, fly parking, dust, caravan sites, Reactive: “we respect your frustrations and difficulties (…) they are taken seriously and
2004 hotline often unanswered, noise, mud on the roads, unfocused floodlights             every attempt is made to listen to your concerns (…)car plate numbers should be
       “Local communities haven’t been treated with respect. We suffered submitted and cars will be asked to move”
       immensely in 2003 (…) despite assurances that the matters would be Assertive: “Floodlighting is necessary to work safely… we will endeavour to be a good
       investigated and resolved, no improvement was evident ”                            neighbour in 2004, but cannot guaranteed it will not be without difficulties (…) our
                                                                                          induction programme is very clearly orientated towards the responsibilities that T5 has
                                                                                          towards the community”
Mar. Some (unresolved issues): fly parking                                                Reactive: “ we pass our apologies about the noise caused by a generator (…) the
2004 Appreciative: BAA congratulated on excellent landscape project work                  generator will be replaced with a quieter version (…) workers re-offending [fly parking]
                                                                                          will receive written warning, which will also be sent to managing director”
June Some (unresolved issues): fly parking; noise                                         Proactive: “BAA plans to request relaxation of planning conditions (work on Sundays)”
2004 Opportunistic: “Can BAA support the ‘Slough Anti Incinerator Network’ to stop Assertive: “All cranes have obstruction lights on them and are within the permitted area
       this horrendous proposal to build two incinerators?”                               set out by the CAA (…)We are aware of the planning application [incinerator], but not
                                                                                          involved’
July Some (unresolved issues): illegal caravan parking                                    Assertive: “BAA does not have authority to defend or challenge the planning applications
2004 Opportunistic: “Can BAA oppose a planning application for a 2,000 space [on incinerators, car park] (…) members of the forum should try to focus on airport
       multi-store car park on the boundary of the airport?”                              responsibilities”
Jan. Appreciative: “On behalf of the Stanwell Moor village, we thank the support of Proactive: “BAA plans to request relaxation of planning conditions to work extended
2005 BAA and community liaison manager with regard to the low flow scheme”                hours to bring back soil for backfill on the principal site”
July Some (unresolved issues): fly parking                                                Proactive: “BAA plans to submit planning application to close local roads over night”
2005 Frustration: “I’m sorry to say that people feel let down...our trust run out…we Assertive: “The fact forum meetings are being held indicate that we care how the
      are frustrated by BAA deciding to push for a third runway - is this not greed?” situation is managed and how we work with the people living around the airport. We are
      Appreciative: “Julie [the community liaison manager leaving] has always gone not trying to sweep any of the impacts [from expansion] ‘under the carpet’’
      to the trouble to look into the problems that had been put before her, even if
      the response hasn’t always been positive...she had become a great friend”




                                                                                        32
 Table 4 – The Practice of Managing the Claims of a Normative Stakeholder

  Purpose                Initiatives              Tactical Approach            Tone
                 External Communication:    Proactive:      consult    with    Caring
                 newsletter, local meetings,communities
                 work of community liaison  Assertive:     involve   senior    Firm, but
                 and environment teams      managers and possibly show        respectful
  Cooperate                                 data to explain position
(Dunham 2006)                               Reactive: quickly put in place    Apologetic
                                            mitigation measures
                 Employee goodwill: charity Reactive: discrete responses       Caring
                 donations                  to requests from people
  Collaborate                               Strategic: seize opportunities
(Dunham 2006)    Employment partnerships with a long-term view                Economic




                                         33

				
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