Q&A - Outline the ways in which a business can better manage stakeholder conflict

There are two main approaches to handling the often conflicting needs of stakeholders…

1 - The Shareholder Approach
- The traditional approach
- Business (management) acts in best interest of shareholders / owners
- Principal aim is to maximise shareholder returns
- Main focus is on growth & profit

2- The Stakeholder Approach
- Increasingly popular
- Business takes much more account of wider stakeholder interests
- Approach based on consultation, agreement, cooperation
- E.g. social and environmental concerns become more important

Over the years various techniques and organisational models have been developed which help businesses handle their relationships with key stakeholder groups. Some of the most important are summarised below:

Workers Councils
- Compulsory for some larger firms in the EU
- Brings worker representatives from across departments & activities for regular discussion of business issues

Stakeholder Directors
- Outside representatives who hold a non-executive position on the Board
- Many UK plcs – particularly those selling direct to consumers and households, have taken steps to reflect customer interests on the Boards

Arbitration / Conciliation
- Formal processes of resolving conflicts between employer and employees (e.g. ACAS)
- Also applies to settling disputes between firms and their suppliers (e.g. negotiating agreement on contractual disputes rather than resorting to legal action)

Share options & other performance-related pay
- Widened participation of share ownership amongst all employees, helps align interests of shareholders and employees