I don't have DC and am normally extremely reluctant to intervene in any family parenting/behavioural issue except when it come to the treatment of dogs/other animals.
It is the only issue that both DH and I are strict over with our DNs - since the boys have been tiny, they have been given firm, clear and consistent instructions/guidance about how to behave around our dogs. Now they are growing up, all three have turned into sensible, lovely boys who are all very good with dogs and other animals, but I don't hesitate to remind if they get a bit over excited say. We've taken this approach both for the welfare of our dogs and for the children and honestly, I couldn't give a stuff if either our BIL/SIL or their grandparents got the hump. Fortunately both are sensible and have been supportive.
My views on the boys' table manners etc is a totally different matter
but on that I keep it zipped. 
I truly believe you must intervene in this issue. Politely but firmly, tell (don't ask) the DC to stop harassing the dog. Give a brief explanation if necessary. Also, can you get children involved in doing something positive with dog? For instance, we regularly take our DNs to local charity dog shows - the boys love these, and they have become very accustomed to entering things like Best Child Handler classes, where they see other children interacting nicely with dogs, and get to come home with a rosette. 
If grandparents or parents don't like you doing this, again firmly but politely reinforce that you willl keep doing so because you care about the safety of the children. I think this is one of those occasions where the adoption of the "broken record" technique will work.
Good luck.