LoginPage 4: Potential stakeholder conflict
It is important for a business to balance the interest of its various stakeholders. Different stakeholder groups have different priorities, for example:
- Shareholders expect the business to make a profit and receive a return on their investment.
- Employees require good working conditions if they are to be retained.
- External stakeholders such as investors may want to see evidence of how a company responds to environmental issues before committing money to the business.
Stakeholder conflict arises when the needs of some stakeholder groups compromise the expectations of others. A business has to make choices which some stakeholders might not like. For example, the cheapest supplier goods, which can help keep prices down for customers, must not come at the expense of ethical practice by suppliers.
Some activities may not give immediate financial return on investment but support the business’ ethical standards. Such policies need to be communicated and explained to all stakeholders involved, so they understand the longer-term value they provide. For example, investment in ‘green’ energy (such as from solar or wind farms) may be more expensive but can help the company reduce its environmental footprint.
Supporting employees may also lead to trade-offs. Reed Elsevier employees are offered development opportunities so that they can reach their potential.
Reed Elsevier will have to justify this investment against the opportunity cost of using the time and resources for other purposes. It will also have to assess the potential downside of not training its employees. This could include losing good people to other organisations or mistakes happening through lack of training.
