How To Resolve Conflict Between Managers And Shareholders

Conflicts between the operational management of a company and the views of shareholders who want to protect their financial interests occurs on a regular basis. This is particularly so if some shareholders are managers and others are not.

Some might say that there is a built-in conflict of interest from the outset between managers who understand the business and want to maximise their own pay and conditions and shareholders who may have no critical business knowledge but require a return on their investment and whose funding is essential to allow the company to operate.

A well-drafted shareholders’ agreement which gives a protocol for dialogue is essential to keep open smooth pathways of communication and reduce points of conflict. 

A shareholders’ agreement can establish a fair relationship between the shareholder-managers and the passive shareholders and agree how the business is run. 

It also protects the shareholders’ investment in the company. Concerns over investment are often the trigger for conflict between managers and shareholders.

In larger companies, having several shareholders who are familiar with the business and can act as spokespeople for the other shareholders is an effective and well-tried device to minimise conflict.

Shareholder agreements should be regularly reviewed to reflect changes in the company’s operation and direction.