A disgruntled stakeholder can disrupt a business–and not in a good way. Blair Horn, partner at Fasken Martineau, and Vivienne Stewart, principal of Railtown Law, offer tips on how to avoid, and resolve, such discontent
“It’s pretty much like any other relationship—communications are really important if you’re looking at keeping and promoting good business relationships among the directors, shareholders, family members and friends,” says Stewart. “If you’re not communicating with your stakeholders effectively, there will be a challenge at some point,” warns Horn. “Good, constructive, transparent communication will help you avoid a dispute and will certainly help you avoid being in a court or arbitration.”
Get an Agreement
A shareholder agreement establishes what the expected roles are for shareholders, directors and management, explains Horn. It would also address dispute resolution: what mechanisms there are to solve the dispute, or if somebody’s unhappy, how they sell their shares. “If you have shareholder agreements or partnership agreements in place or policies that would deal with whatever the issue is, then you can pull those out and go through the process and with any luck that will resolve the problem,” says Stewart.
Be careful that you don’t ignore the stakeholders, says Horn. Even when they have less power or fewer financial resources, their interests still need to be addressed in a fair
and even-handed way. “When you’re negotiating with somebody or even just resolving a dispute, acting in good faith is not just focusing on your own needs and your own desires but also considering where are they coming from,” says Stewart.
Turn to a Third Party
Having an independent director on the board might help prevent or resolve a dispute, says Horn. “Bringing the right independent expertise in when there is actually a dispute might help you get to a path on resolution.” Depending on the issue, that expert could be a technical advisor, a financial advisor, a governance specialist or legal help. Or even a therapist to do relationship counselling, suggests Stewart, since disputes often stem from personality conflicts.
Mediate, Arbitrate or Go to Court
“And in that order, you’re going from the simplest to the most complex—and cheapest to most expensive,” says Horn. “You’re not going to get a binding decision from a mediator; you can get a binding decision from an arbitrator; and you will get a binding decision from a court.” The mediation and arbitration process is confidential—unlike court, which is public, notes Stewart. She recommends Mediate BC, whose members have experience in different types of business and disputes.