3.4.3 Shareholders vs Stakeholders (3/3) Flashcards
When is conflict between Shareholders + Stakeholder likely to arise
When their objectives are in direct conflict
How can shareholders and employees be in conflict
Meeting objectives of employees in terms of higher wages, better conditions, more perks + bonuses, training + improving employee welfare comes at a cost
If needs of employees are met in full there is likely to be a negative impact on profits and dividends;
Conflict can arise if shareholders insists that the rewards of the employees should not come at the expense of
dividends.
As a result of shareholders insisting this, employees will try to apply pressure on the business to ensure their objectives are being met by threatening industrial action.
This can jeopardise the survival of business if pressure is too disruptive
How can shareholders and customers be in conflict
Conflict is likely to arise between shareholders + customers if a business charges prices that are too high.
-Higher prices will help boost shareholder returns but reduce the purchasing power of customers.
Conflict can also arise:
- if poor customer service is apparent
- Businesses fail to invest in R+D and bring out new products
How Shareholder and Directors/Managers be in conflict?
If managers begin to prioritise their own objectives, such as maximising financial rewards and other benefits the conflict may arise as these can be costly which can lead to lower dividends +returns for the shareholders.
Another common conflict between these 2 is :
-the balance between paying dividends + retaining profit for investment
How can shareholders and the environment be in conflict?
In an effort to maximise profits, shareholder may persuade a business to reflect it responsibilities towards the environment not caring about it
How can Shareholders and the government be in conflict?
Conflict between shareholders and the government is likely to arise if businesses break the law.
e.g shareholders may evade tax to maximise profits.
