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conflict between stakeholders
can be quite common. 
Managers must take the potential for such conflict into account when setting policy and be prepared to 
deal with it if it arises in a form that affects the organisation. 
A relationship in which 
conflict
between stakeholders is vividly characterised is that between 
managers 
and shareholders
. The relationship can run into trouble when the managers' decisions focus on 
maintaining the corporation as a
 vehicle for their managerial skills
while the shareholders wish to see 
radical changes so as to enhance their 
dividend stream and increase the value of their shares
. The 
shareholders may feel that the business is a 
managerial corporation
run for the benefit of managers and 
employees without regard for the objectives of the owners. The conflict in this case can be seriously 
detrimental to the company's stability.
(a) Shareholders 
may 
force resignations and divestments of businesses
, while managers may seek 
to preserve their empire and provide growth at the same time by undertaking risky policies. 
(b) 
In most cases, however, managers cannot but acknowledge that the shareholders have the 
major 
stake
as owners of the company and its assets. Most companies therefore focus on making 
profits and increasing the market value of the company's shares, sometimes at the expense of the 
long-term benefit of the company. Hence long-term strategic plans may be 'hijacked' by the need 
to make a sizeable profit in one particular year; planning horizons are reduced and investment in 
long-term business prospects may be shelved. 
BPP Tutor Toolkit Copy

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CHAPTER 1
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BUSINESS ORGANISATIONS AND THEIR STAKEHOLDERS