Communication, Public Relations, and Stakeholder Theories

Introduction and Context

Public relations (PR) is often described as communication between an organisation and its publics. This description is accurate but incomplete. Contemporary PR is also a managerial, relational, ethical, and strategic activity. It involves identifying stakeholders, understanding their expectations, creating mutual value, managing conflict, and building legitimacy over time.

Corporate communication provides the wider organisational context in which public relations operates. It includes internal communication, media relations, investor communication, government affairs, public affairs, crisis communication, corporate branding, digital engagement, and communication with communities and employees. Public relations is therefore not simply publicity or promotion. It is a planned process through which organisations listen, interpret, respond, and communicate with groups that affect or are affected by organisational decisions.

The theories in this chapter provide different ways of understanding that process. Communication models explain how messages travel and how meaning is created. Systems theory presents organisations as open systems that exchange resources and information with their environments. Stakeholder theory focuses attention on groups with interests in organisational decisions. Relationship management theory treats relationships, rather than messages alone, as the central outcome of public relations. Excellence theory examines the organisational conditions under which PR contributes strategically and ethically. Grunig and Hunt’s models distinguish different historical approaches to public relations, while situational theory explains why some people become active publics around particular issues. Agenda-setting, framing, and diffusion theory help explain how issues become prominent, how they are interpreted, and how innovations spread.

Learning Objectives

By the end of this chapter, students should be able to:

1. Explain major communication models and apply them to organisational situations.
2. Describe systems theory and stakeholder theory as foundations for corporate communication.
3. Distinguish among Grunig and Hunt’s four models of public relations.
4. Apply relationship management and excellence theory to PR planning.
5. Use situational theory of publics to classify stakeholders and publics.
6. Explain how agenda-setting, framing, and diffusion influence public understanding and behaviour.
7. Analyse an organisational communication problem ethically and recommend an appropriate response.

1. Communication as Meaning-Making

Communication is not merely the transmission of information from a sender to a receiver. It is a social process in which people create, interpret, negotiate, and sometimes contest meaning. A corporate announcement may be intended as reassuring, but employees may interpret it as evasive if important information is omitted. Meaning depends on language, culture, prior experience, power relationships, timing, channel, and context.

1.1 Linear, interactional, and transactional models

The linear model represents communication as a one-way flow:

Source → Message → Channel → Receiver

This model is useful for understanding announcements, advertisements, speeches, and emergency instructions. Its limitation is that it treats the receiver as relatively passive and gives little attention to feedback or interpretation.

The interactional model adds feedback and context. A receiver responds, the source adjusts, and the communication becomes a sequence of exchanges. A company’s social-media post followed by comments, replies, and a revised statement is better represented by this model.

The transactional model goes further. It views participants as simultaneously sending and receiving messages. Tone, silence, body language, platform design, organisational history, and public expectations all influence meaning. In a crisis, an organisation communicates not only through its formal statement but also through its speed of response, choice of spokesperson, visual presentation, and willingness to answer questions.

Important communication concepts include:

• Encoding: converting an idea into words, images, symbols, or behaviour.
• Decoding: interpreting the message.
• Channel: the medium through which communication occurs.
• Feedback: information showing how a message has been received or understood.
• Noise: anything that interferes with communication, including technical problems, ambiguity, misinformation, cultural differences, and distrust.
• Context: the social, political, organisational, and historical circumstances surrounding communication.
• Semantic meaning: the meaning associated with words and symbols.
• Pragmatic meaning: the meaning conveyed by use, situation, relationship, and consequences.

1.2 Communication effectiveness

Communication effectiveness cannot be judged only by message distribution. A message may reach one million people and still fail if it is not understood, believed, considered relevant, or acted upon. PR evaluation should therefore distinguish outputs from outcomes.

These measures should not be treated as automatically causal. A rise in positive sentiment, for example, may result from external events rather than a PR campaign.

2. Systems Theory and the Organisation’s Environment

Systems theory views an organisation as an open system. It receives inputs from the environment, transforms them through organisational processes, and produces outputs that return to the environment. Feedback then influences future inputs and decisions.

Figure: An open-systems view of organisational communication.

The model has several implications for PR. First, communication is not an isolated department activity; it is connected to organisational decisions. Second, publics can provide valuable environmental intelligence. Third, organisations that ignore feedback may become less adaptive. Finally, communication cannot permanently repair a harmful policy. If the underlying organisational behaviour is unacceptable, strategic communication must include advice, change, and accountability.

Systems may be described as open or closed. An open system exchanges information and resources with its environment. A closed system attempts to insulate itself and relies mainly on internal assumptions. In practice, no large organisation is completely closed, but some become functionally closed when leaders suppress criticism, disregard employees, or monitor only favourable media.

3. Stakeholder Theory

Stakeholder theory, associated particularly with R. Edward Freeman, argues that organisations should consider all groups that can affect or are affected by organisational activity. Stakeholders may include employees, customers, shareholders, suppliers, regulators, journalists, local communities, advocacy groups, partners, and future generations.

A stakeholder is not simply an audience. An audience may receive a message, whereas a stakeholder has an interest, relationship, influence, vulnerability, or potential claim connected with the organisation. The same group can be both a stakeholder and a public, but the terms are not identical.

3.1 Stakeholder identification and prioritisation

Stakeholder analysis commonly considers:

• Power: the ability to influence organisational outcomes.
• Legitimacy: whether a claim is socially accepted or regarded as appropriate.
• Urgency: the time sensitivity of a claim.
• Impact: the degree to which the organisation affects the group or the group affects the organisation.
• Dependency: the extent to which one party relies on the other.

A powerful investor, a vulnerable local community, and a highly urgent regulator’s request may require different communication strategies. Prioritisation should not mean ignoring less powerful stakeholders. Ethical communication recognises that power and legitimacy are not the same thing.

3.2 Stakeholder communication as dialogue

A stakeholder approach requires more than transmitting information. It involves listening, consultation, explanation, negotiation, and response. For example, a company planning a factory expansion should communicate before final approval where possible, disclose relevant impacts, provide accessible consultation, and explain which suggestions were accepted or rejected.

Stakeholder engagement is credible only when participation can influence decisions. Consultation that merely creates the appearance of inclusion may damage trust. Organisations should also consider accessibility, language, digital exclusion, privacy, and the unequal ability of groups to participate.

4. Relationship Management Theory

Relationship management theory, developed in PR scholarship by scholars including Ledingham, treats relationships between organisations and publics as the central focus of public relations. Messages are tools; relationships are the longer-term outcome.

Common relationship dimensions include:

• Trust: confidence that the organisation is honest, competent, and reliable.
• Commitment: willingness to maintain the relationship.
• Satisfaction: evaluation of whether the relationship meets expectations.
• Control mutuality: the degree to which both parties believe they can influence the relationship.
• Reciprocity: recognition that both parties have responsibilities and benefits.
• Openness: willingness to share relevant information and engage with concerns.

A relationship may be beneficial even when the parties disagree. A regulator and a corporation can maintain a professional relationship while disputing a specific decision. Relationship management therefore does not mean eliminating conflict; it means managing disagreement through credible, fair, and sustained interaction.

Practical application

Suppose a university receives complaints about inaccessible digital learning materials. A publicity approach might issue a statement describing the university as inclusive. A relationship approach would also consult affected students, audit accessibility, provide timelines, report progress, and create channels for continuing feedback. The relationship improves through organisational action supported by communication.

5. Grunig and Hunt’s Four Models of Public Relations

James Grunig and Todd Hunt identified four models that describe major approaches to PR. They are historical and analytical categories rather than four rigid departments.

5.1 Press agentry/publicity

This model seeks attention, often through dramatic stories, events, or celebrity association. It can be effective for generating awareness but becomes unethical when it relies on deception, fabricated claims, or concealment of material facts.

5.2 Public information

The public-information model emphasises accurate dissemination. Government notices, investor updates, and public-service information may use this approach. Its limitation is that information may flow outward without meaningful listening.

5.3 Two-way asymmetrical communication

This model uses research and feedback to make persuasion more effective, but the organisation generally seeks to change publics more than it changes itself. Market research, message testing, and segmentation can be valuable, yet ethical concerns arise when research is used to exploit vulnerabilities or disguise advocacy.

5.4 Two-way symmetrical communication

The symmetrical model emphasises dialogue, mutual understanding, and adjustment by both organisation and publics. It does not require that both sides have identical power. Rather, it recognises a responsibility to negotiate fairly and consider legitimate public interests.

These models should be applied critically. Real campaigns often combine them. A public-health campaign may use public information for safety instructions, asymmetrical research to make messages comprehensible, and symmetrical consultation with affected communities.

6. Excellence Theory

Excellence theory, associated with Grunig and colleagues, proposes that PR contributes most effectively when it is managed strategically, connected to senior decision-making, and practised through two-way communication. Excellent communication departments do not merely distribute approved messages. They provide environmental intelligence, counsel leaders, represent stakeholder perspectives, and help the organisation adapt.

Important principles include:

1. PR should participate in strategic management rather than operate only as a technical support function.
2. Communication should be based on research and evaluation.
3. Organisations should maintain relationships with multiple publics, not only customers or investors.
4. Two-way symmetrical communication can support ethical and effective relationship management.
5. Diversity within the communication function improves representation and decision quality.
6. A communication function needs sufficient autonomy to provide credible counsel.

The theory has also been criticised. Its assumptions may reflect Western organisational contexts and may understate structural inequalities, political power, cultural difference, and situations in which mutual adjustment is not equally possible. Excellence should therefore be treated as a framework for analysis, not a universal guarantee of ethical conduct.

7. Situational Theory of Publics

Situational theory of publics, developed by Grunig, explains why people become active around some issues but remain passive around others. It distinguishes among:

• Nonpublics: groups unaffected by an issue and not involved in it.
• Latent publics: groups affected by an issue but not yet recognising the consequences.
• Aware publics: groups that recognise an issue but may not act.
• Active publics: groups that recognise the issue, discuss it, and take action.

Three central variables are:

• Problem recognition: whether people perceive that something needs attention.
• Constraint recognition: whether people believe barriers prevent action.
• Level of involvement: the personal importance of the issue.

High problem recognition and high involvement tend to encourage active communication behaviour. High perceived constraints may reduce action even when concern is strong. The theory helps practitioners avoid treating every stakeholder as equally informed, involved, or mobilised.

For example, residents near a proposed transport project may initially be a latent public. After learning that construction could affect homes, they become an aware public. If they form an association, attend hearings, and contact officials, they become an active public.

Practitioners should not use this theory merely to suppress activism. Its ethical value lies in improving relevance, accessibility, and responsiveness. A public that is inactive because it lacks information may need clear explanation; a public facing genuine barriers may need practical participation mechanisms.

8. Agenda-Setting and Framing

8.1 Agenda-setting

Agenda-setting theory, associated with McCombs and Shaw, proposes that media attention influences which issues people perceive as important. It does not mean that media determine exactly what people think. Rather, repeated prominence, placement, duration, and visibility can influence what people think about.

Corporate communicators participate in agenda-building: the process through which organisations, journalists, public officials, activists, and communities compete to place issues on public and media agendas. Newsworthiness, conflict, novelty, human interest, proximity, elite involvement, and visual material can affect attention.

Digital platforms complicate agenda-setting. Search systems, recommendation algorithms, influencers, users, and coordinated campaigns can amplify issues outside traditional newsrooms. Attention is therefore distributed across interconnected media systems rather than controlled by a single institution.

8.2 Framing

Framing refers to selecting and emphasising aspects of perceived reality to promote a particular definition of a problem, interpretation of causes, moral evaluation, or recommendation for action. A labour dispute may be framed as an issue of economic survival, employee fairness, customer service, or legal compliance. Each frame highlights some facts and makes others less visible.

Framing is not automatically deceptive. Any communication involves selection. Ethical framing requires accuracy, relevant context, transparent evidence, and avoidance of misleading omissions. Practitioners should ask:

1. What problem is being defined?
2. Who is represented as responsible?
3. Which values are emphasised?
4. Who benefits or loses from this interpretation?
5. What alternative frames are being excluded?

9. Diffusion Theory

Diffusion theory, developed by Everett Rogers, explains how innovations spread through a social system over time. An innovation may be a product, technology, policy, organisational practice, or communication behaviour.

The diffusion process is often described through five stages:

1. Knowledge: an individual or organisation becomes aware of the innovation.
2. Persuasion: attitudes toward it develop.
3. Decision: adoption or rejection occurs.
4. Implementation: the innovation is put into use.
5. Confirmation: the adopter seeks reinforcement or reverses the decision.

Adoption is influenced by perceived relative advantage, compatibility, complexity, trialability, and observability. An innovation that offers clear benefits, fits existing values, is easy to understand, can be tested, and produces visible results is more likely to spread.

Rogers also identified adopter categories: innovators, early adopters, early majority, late majority, and laggards. These categories describe adoption timing, not intelligence or moral worth. Practitioners should avoid stigmatizing people who adopt later, particularly where cost, access, disability, infrastructure, or trust affect adoption.

Diffusion theory is useful in campaigns promoting vaccination, digital services, sustainable practices, safety procedures, or new internal technologies. Communication alone cannot overcome an innovation that is unaffordable, inaccessible, unsafe, or poorly designed.

10. Integrating the Theories in PR Practice

The theories can be integrated into a practical planning sequence:

1. Scan the system: identify environmental trends, risks, resources, and feedback.
2. Map stakeholders: identify interests, influence, vulnerability, legitimacy, and dependency.
3. Segment publics: assess problem recognition, constraints, and involvement.
4. Define the relationship objective: decide whether the priority is trust, participation, understanding, cooperation, or conflict management.
5. Select the communication approach: determine whether information, persuasion, dialogue, negotiation, or a combination is appropriate.
6. Consider agenda and frames: identify which issues are receiving attention and how competing actors define them.
7. Plan diffusion: identify adoption barriers and the kinds of evidence or support needed at each stage.
8. Evaluate outcomes: measure understanding, attitudes, behaviour, relationship quality, and organisational change.

Illustrative case: Riverbend Energy’s wind-farm proposal

Background. Riverbend Energy proposes a wind farm near three rural communities. The project could create employment and renewable-energy capacity, but residents are concerned about landscape change, noise, wildlife, property values, and consultation procedures.

Problem. Riverbend initially publishes promotional material describing the project as a major environmental benefit. Local residents interpret the campaign as one-sided and form an opposition group. Media coverage frames the dispute as a conflict between corporate profit and community rights.

Analysis. Systems theory shows that community feedback is an environmental input, not merely a communication obstacle. Stakeholder theory identifies residents, landowners, employees, regulators, environmental organisations, local government, investors, and future energy users. Situational theory indicates that residents have become an active public: they recognise the issue, feel personally involved, and have organised to reduce constraints. Framing analysis shows that Riverbend’s environmental frame competes with residents’ fairness and local-control frames.

Approach. Riverbend establishes an independent consultation process, publishes accessible impact data, discloses uncertainties, holds meetings at varied times and locations, provides translation and transport support, and creates a formal response register. Engineers answer technical questions, while senior leaders explain which project features can be changed. The company commissions an independent review of noise and wildlife effects and considers community benefit payments and revised site boundaries.

Outcome. In this illustrative case, opposition does not disappear, and some residents remain opposed. However, the quality of information improves, misinformation decreases, and the planning authority receives evidence from a broader range of participants. Riverbend revises the proposal and establishes continuing monitoring.

Learning points. The case demonstrates that symmetrical communication is not guaranteed agreement. Good PR may produce disagreement that is better informed and more fairly managed. It also shows that reputation depends on organisational conduct, not only message skill.

11. Ethical, Governance, and Professional Issues

Public relations involves power over information, visibility, reputation, and public interpretation. Ethical practice therefore requires more than legal compliance. Key responsibilities include:

• truthfulness and correction of errors;
• clear identification of sponsors and paid content;
• protection of confidential and personal data;
• respect for vulnerable groups and cultural difference;
• avoidance of astroturfing, fake accounts, and undisclosed influence;
• separation of evidence from opinion;
• accessibility of important information;
• responsible use of images, testimonials, and artificial intelligence;
• preservation of records and accountability for decisions.

AI tools can assist with monitoring, translation, summarisation, audience analysis, and drafting. They may also reproduce bias, invent facts, expose confidential information, or generate persuasive content without adequate disclosure. Human review, data governance, source verification, consent, and documented accountability are essential. Automated sentiment analysis should be treated cautiously because sarcasm, dialect, multilingual expression, and context can produce misleading classifications.

12. Contemporary Developments and Best Practice

Corporate communication increasingly takes place in hybrid media environments. Employees may become public communicators; customers can publish evidence instantly; activists can coordinate across platforms; and a local event can become global within hours. Organisations should therefore prepare for continuous communication rather than rely only on occasional campaigns.

Best practice includes:

1. Align communication with responsible organisational behaviour.
2. Begin with listening and stakeholder analysis.
3. Use plain, inclusive, and accessible language.
4. Provide evidence and acknowledge uncertainty.
5. Match channel choice to stakeholder needs rather than organisational convenience.
6. Give publics meaningful opportunities to influence decisions.
7. Prepare scenario-based crisis protocols without scripting dishonesty.
8. Evaluate outcomes and report limitations.
9. Protect privacy and disclose sponsorship or automated assistance.
10. Treat disagreement as information rather than automatically as reputational hostility.

Chapter Summary

Communication is a process of meaning-making shaped by feedback, context, power, and relationships. Systems theory presents organisations as open systems that receive inputs, produce outputs, and adapt through feedback. Stakeholder theory expands organisational responsibility beyond owners and customers to include groups affected by organisational conduct. Relationship management theory identifies trust, commitment, satisfaction, mutual influence, and openness as important relational outcomes.

Grunig and Hunt’s four models range from one-way publicity and public information to two-way asymmetrical and two-way symmetrical communication. Excellence theory argues that PR is most valuable when it participates in strategic management, represents stakeholder perspectives, and uses research and ethical dialogue. Situational theory of publics explains differences between nonpublics, latent publics, aware publics, and active publics through problem recognition, constraint recognition, and involvement. Agenda-setting helps explain issue prominence, framing explains interpretive emphasis, and diffusion theory explains how innovations spread through social systems.

Together, these theories support a practical approach: scan the environment, identify and prioritise stakeholders, understand public activity, select an ethical communication strategy, facilitate dialogue, and evaluate both communication and organisational outcomes.

Key Terms

Agenda-setting: The process through which issue prominence influences what people consider important.

Aware public: A group that recognises an issue affecting it.

Channel: The medium through which a message is communicated.

Communication model: A conceptual representation of how communication occurs.

Diffusion: The spread of an innovation through a social system over time.

Encoding: Converting an idea into communicable symbols or behaviour.

Excellence theory: A theory linking effective PR with strategic management, research, and two-way communication.

Framing: Selecting and emphasising aspects of an issue to shape interpretation.

Latent public: A group affected by an issue but not yet recognising it.

Noise: Interference that disrupts communication or meaning.

Open system: A system that exchanges information, resources, and influence with its environment.

Public information model: A one-way PR model focused on distributing accurate information.

Public relations: Planned communication and relationship management between organisations and their publics.

Relationship management: An approach that treats organisation–public relationships as central PR outcomes.

Stakeholder: A group or individual that affects or is affected by an organisation.

Situational theory of publics: A theory explaining how publics become active around issues.

Symmetrical communication: Communication involving mutual understanding and possible adjustment by all parties.

Two-way asymmetrical communication: Research-based communication primarily intended to change publics in the organisation’s interest.

Transactional communication: A model in which participants simultaneously send, receive, and interpret messages.

Trust: Confidence in another party’s honesty, competence, reliability, and concern.

Review Questions

Short Answer Questions

1. What is the main difference between a linear communication model and a transactional model?
2. Define a stakeholder and give two examples relevant to a corporation.
3. What are the four models of public relations identified by Grunig and Hunt?
4. Distinguish between a latent public and an active public.
5. What is meant by framing in public communication?

Long Answer Questions

1. Explain how systems theory changes the way a PR practitioner understands organisational communication.
2. Discuss the relationship between stakeholder theory and relationship management theory.
3. Compare two-way asymmetrical and two-way symmetrical communication, including their ethical implications.
4. Explain excellence theory and evaluate one limitation of its application across different cultural or political contexts.
5. Describe the five stages of diffusion and show how they could be applied to a new organisational technology.

Analytical / Application Questions

1. A company faces criticism after announcing a factory closure without consulting employees or the local community. Use systems theory, stakeholder theory, and situational theory of publics to analyse the problem and recommend a response.
2. A public-health organisation wants to increase adoption of a digital vaccination-booking system. Apply agenda-setting, framing, and diffusion theory to design an ethical communication strategy.
3. A corporation claims that its consultation process is participatory, but it ignores all opposing submissions. Evaluate the claim using the four PR models, relationship management theory, and excellence theory.

Multiple Choice Questions with Answers

Question 1

Which communication model treats participants as simultaneously sending, receiving, and interpreting messages?

A. Linear model

B. Transactional model

C. Public information model

D. Diffusion model

Correct Answer: B. Transactional model

Question 2

In systems theory, feedback primarily enables an organisation to do what?

A. Eliminate all external influence

B. Avoid stakeholder relationships

C. Adapt to information from its environment

D. Replace organisational decision-making

Correct Answer: C. Adapt to information from its environment

Question 3

Which factor is central to stakeholder prioritisation?

A. Font size in a press release

B. Power, legitimacy, and urgency

C. The age of the organisation’s logo

D. The number of internal departments

Correct Answer: B. Power, legitimacy, and urgency

Question 4

Which Grunig and Hunt model is primarily one-way and focused on distributing accurate information?

A. Public information

B. Two-way symmetrical

C. Two-way asymmetrical

D. Transactional communication

Correct Answer: A. Public information

Question 5

A group recognises an issue, discusses it publicly, and organises collective action. In situational theory, this group is an:

A. Nonpublic

B. Latent public

C. Aware public

D. Active public

Correct Answer: D. Active public

Question 6

Agenda-setting theory is mainly concerned with how communication influences:

A. Which issues people regard as important

B. The legal ownership of media companies

C. The technical speed of a communication channel

D. The number of employees in an organisation

Correct Answer: A. Which issues people regard as important

Question 7

Which statement best describes framing?

A. Sending a message without a channel

B. Selecting and emphasising aspects of an issue to shape interpretation

C. Measuring the number of people who receive a message

D. Classifying employees by job title

Correct Answer: B. Selecting and emphasising aspects of an issue to shape interpretation

Question 8

Which of the following is one of Rogers’ perceived attributes of an innovation?

A. Relative advantage

B. Corporate hierarchy

C. Media ownership

D. Message length

Correct Answer: A. Relative advantage

Question 9

A PR programme measures trust, commitment, and mutual influence. It is primarily evaluating:

A. Relationship quality

B. Printing efficiency

C. Audience demographics only

D. Message encoding speed

Correct Answer: A. Relationship quality

Question 10

Why is consultation without any possibility of influence ethically problematic?

A. It always reduces communication costs

B. It may create the appearance of participation without meaningful stakeholder power

C. It guarantees two-way symmetrical communication

D. It prevents all publics from becoming aware

Correct Answer: B. It may create the appearance of participation without meaningful stakeholder power