Business mediation example
Shareholder A and B are joint directors of a company and cannot agree on a way forward for the company. Things are, in fact, so bad between them they can’t even be in the same room. They argue in front of the staff and morale is beginning to suffer. The latest dispute relates to a distribution agreement. Effectively the “honeymoon period” is over.
If things carry on as they are, they will lose this lucrative contract and their disagreement will be harmful to growth. However, B has now decided he can no longer work with A but does not want A to be the sole director and, in his view, possibly risk the business being run into the ground. B is also not prepared to waste years of hard work, let alone the initial capital investment. B also knows A cannot immediately buy him out at market value as A does not have the funds. B has suggested that they sell to a third party, but A will not agree.
So, A and B are effectively stuck. There is nothing to litigate at this point. No breaches of contract or fiduciary duties. And anyway, they have both had experience of litigation in the past. Exorbitant costs and the lengthy process took their toll. They also know there can only ever be a winner and a loser in litigation. So, what can they do?
Cue mediation. Alternative dispute resolution is fast becoming the “go-to” option for settling all kinds of disputes and, given the backlog in court cases due to the pandemic, the courts are starting to direct lawyers towards mediation.
What does mediation mean in business?
Mediation is non-adversarial. A mediator, the neutral third party, allows individuals to work through their grievances to reach a mutually satisfactory resolution allowing the parties to move forwards. The mediator untangles the dispute and helps the parties become unstuck.
Mediation is informal and, in these Covid times, usually online, which works surprisingly well as this can all be done from home, so the process is much more relaxed. Finally, the costs and time commitments of mediation are a fraction of litigation.
Going back to the case study, A and B opted for mediation and it became clear during the mediation that the contract dispute was only one in a long list of grievances. A felt B was too cautious and held the business back, whilst B felt A did not think through the consequences in the long term. Both felt mutually disrespected and constantly felt undermined. In short, both felt that their concerns were not being heard and taken seriously by the other. This conviction often underpins a dispute.
During the mediation, facilitative mediation techniques were used to allow A and B to have their say, using their own words and language. The mediator was able to control bouts of anger, aggression and other emotions blocking the route towards a resolution. A good mediator is present and attentive picking up on tells and cues to alert them to trigger points and the real concerns underlying the “main conflict”. With patience and skill, the parties can be shown how to navigate choppy waters and realise what they need to say/do without actually being told. Mediation is subtle yet extremely effective. The most important thing is that the disputants are allowed their own space to work through the issues but always under the skilled eye of the mediator.
Of course, there is no guarantee, of resolution. After all, it is up to the parties who must be 100% committed to the process. Even when a dispute is not resolved, the parties will usually have shifted in their thinking, having spent some time in the other’s shoes and this can have a transformative effect on the relationship going forwards. This is quite unlike the adversarial process of litigation when, the loser will just want to get as far away from the winner as possible, the chasm between them will be wider and the feelings of loss incalculable.