There are two main approaches to handling the often conflicting needs of stakeholders:
Shareholder Approach
Stakeholder 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
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:
Approach
Description
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
