Understanding Stakeholder Conflicts: Key to Top Marks in SACs and Exams (Full Transcript)

Speaker 1: The very final thing to consider with all our stakeholders is how the interest can be in conflict, and that's where the really top marks are for this topic on the SACs and the exam. What are we talking about? We're saying, well, the interest of one group of stakeholders can be in conflict with another. So let's just take a few examples, but it could be any two stakeholders. But here's what shareholders generally want from a business. These things here and here's what employees want. You could argue that for a business to make high profits, that is actually could come at the expense of what employees want. If you increased all the employees wages, they'd love that. So they'd be getting their needs here met. But you could say the shareholders probably wouldn't like that. So when we say in conflict, we say it's good for one group and bad for another. Increase everybody's wages by 50 percent. Great for employees, bad for shareholders. Those interests are in conflict. Let's take another group. Let's keep shareholders, but let's put in customers. We could say a bit of a conflict between shareholders having a desire to receive high profits from the business, which they get in the form of dividends, whereas customers want to purchase at a reasonable price and receive a lot of customer service. We could say, say, a business lowered its prices by 20 percent and hired an extra 100 customer service people to work in stores. Customers would love that. Prices going down and more service. However, the shareholders would not like that because that's going to lower profits by a lot. We're going to lower prices and increase the number of people we hire. Well, that's going to lower our profits and our dividends. Shareholders would not like that. Another example, we've got the board of directors and the local community and society, big conflict between these ones. Board of directors want to be well remunerated and directors, fees and shares and so on, whereas the local community wants to benefit from local employment opportunities. A lot of board of directors actually get incentives. The business makes high profits. OK, so one issue there is one way to lower profits, particularly if you're an Australian business, is to close your Australian factory and move it overseas, say to China or Vietnam or Cambodia or something like that. Hang on. Well, there's a conflict here. The board of directors are going to be well remunerated for lowering costs by moving production to China. But the local community is going to be very unhappy because now all those jobs in the local community are gone. We've also got management could be in conflict with suppliers. How so? Well, here's one way. Management often wants to be involved. One of the reasons they work for a particular business is because they want to, you know, have a say in setting objectives and achieving them. A lot of people that want to challenge themselves and work for businesses that allow them to do this. Well, one way they can do that is to change who the suppliers are. Whereas a supplier, they want to be locked in as what's called a preferred supplier. They want the business to always use them. So you could say, for example, if you've got a job as the CEO or the head of manufacturing at Apple and you decided to change from one supplier to another because it was cheaper, well, the original supplier is going to be really unhappy with that. So there's going to be a conflict. And a final example, and like we said, there's you know, it could be any two stakeholders, but let's just take one more conflict between shareholders or owners and the government. And it's a huge one. There's many, but this is just one. Governments want to receive taxes from the business. Why? So they can pay for schools and hospitals and roads and stuff. Whereas shareholders or owners want the share price to increase. So one way a government could increase or the amount of taxes it receives is to slug a tax on business, maybe on its profits or payroll tax on the number of employees. That is going to be really good for business. However, if the shareholders aren't going to like that because that's going to lower profits, lower profits usually lower the share price and they're going to lose money. It could go the other way, too. What about a local business says, you know, we're going to move our operations from Australia, we're going to move to a country where it's got lower taxes. Well, the shareholders are going to be very happy with that and the share price is going to go up. But the Australian government is going to be very unhappy because they're not going to receive any taxes at all. So the point of this particular video was not that, you know, every single conflict between every two possible stakeholders. It's just that, you know, at some point to get the best marks on this topic, you're going to need to talk about the conflict between two stakeholders. And all we ever mean with that is it's good for one group and bad for another group.