Reconciling Stakeholder Interests

Definition of a Stakeholder:

Stakeholders are individuals and/or firms that are influenced by business operations AND that have an impact on business operations. The main stakeholders of a business are: employees, customers, society, institutions, environment. 

Management must juggle the competing interests of stakeholders and find compromise solutions (pathway forward).

Reconciling Stakeholder Interests:

Stakeholders each have different interests; they are impacted differently and want different outcomes from a business.

These demands can at times be incompatible; the outcomes desired by one stakeholder is directly at odds with that of another stakeholder.

Reconciling conflicting interests is a highly challenging job of management. Manager must draw upon all their skills to map out a pathway forward in solving disputes and issues where there are conflicting views.

Managers must constantly assess the actions of the business, to understand how each stakeholder will likely react to certain decisions, and take proactive action to minimise the impact.

Firms are expected to be enterprising (take risks), comply with the law, be socially just and environmentally sustainable in the operations.

Focus upon the triple bottom line (profit, people and planet) can minimise the intensity of the issues between various stakeholders.

Shareholder vs Society:

Shareholders own the firm; and desire the firm to be profitable so their investment will increase in value. This is a good thing; it provides the driver behind all risk taking. Shareholder returns leads to good superannuation returns for workers.

This pursuit of profitability, however, can be at odds with social expectations. If the firm engages in actions that are disruptive to society in pursuit of profit, there will be conflict. But society also desire goods and services at a reasonable price; any attempt to rip off consumers in pursuit of profit will also lead to conflict.

Shareholder vs Employee:

Employees are the force that produces value for the owners of the firm. Shareholders own the firm and make profit from the labour of the employees within the firm.

Employees desire good pay, opportunities to grow, a role in decision-making, and to feel valued and respected. 

If in pursuit of shareholder profit, a firm exploits employees or disrespects employees or rips employees off, this will result in conflict. Trade unions defend employees can organise strikes. 

Proactive Stakeholder Engagement:

Stakeholder engagement refers to the proactive actions of management seeking input from stakeholders and actively involving them in the decision-making process. By engaging with stakeholders before any issues arise, management can address concerns and minimise conflict.

By engaging stakeholders and addressing their concerns, a business is signalling that it is open, willing and ready to act in ways that will benefit stakeholders. This makes the reconciliation process easier.

Articles and Extension:

10 Examples of Stakeholder Engagement Objectives & Results

Real-Life Impact: 5 Stakeholder Engagement Success Stories