Stakeholder Vs. Shareholder: What’s The Difference?

Both stakeholders and shareholders have a vested interest in what a company does and its profits. The similarities in names and the fact they’re both affected by the company’s performance can lead to the terms being used interchangeably. However, the fact of the matter is that the two aren’t the same and have a vested interest in the company for different reasons.

It’s true that someone can be both a shareholder and a stakeholder – for shareholders, they are automatically both – but that doesn’t mean that they’re the same.

Shareholders are people who own shares of a company. That means that their interest in the company is purely tied to its profitability, as they make more money from their shares as the company gets richer.

Stakeholders may own shares, but they are typically tied to the company in other ways, such as being an employee or a supplier.

Key Takeaways:

What Is a Stakeholder?

A stakeholder is someone who has a vested interest in the actions of the company. It’s not necessary to own shares or be invested monetarily in order to be a stakeholder. There are several different types of stakeholders, and their exact tie to the company varies on their “stake,” so to speak.

• Shareholders. Shareholders are automatically stakeholders, as they’re invested – literally – in the success of the company. Their profits are tied to how profitable the company is.

• Suppliers or clients. Other companies that rely on your company are also stakeholders. If a company is a regular supplier or client of your company, they have a stake in your company’s success. If the company were to founder, they’d have to scramble to get supplies or find a place to sell their goods, depending.

• The general public. The general public is often considered a stakeholder of a company, as they’re affected by what the corporation does. This includes pollution, whether a company might pave over a green space to build a store, as well a general corporate responsibility.

• Employees. A company’s personnel are stakeholders, as they’re dependent on it for their paychecks. They may also be deeply involved in a company project and be a stakeholder in terms of their current job, career prospects, and sense of accomplishment.

Stakeholders are much more varied than shareholders are and are typically tied to the company long-term. Employees, for instance, may work at a company their entire career, making them extremely invested in how it performs. Suppliers can sign long-term contracts, or your company may be the only place they can reasonably get what they need.

There has been a push in corporate culture for more corporate responsibility of late – the idea of taking into account all of a company’s stakeholders rather than just their shareholders. It remains to be seen whether it’ll continue or if corporate leadership will revert to being entirely profit focused once more.

What Is a Shareholder?

A shareholder is someone who owns shares in a company. This doesn’t mean that they have to own a huge number of them or be a member of the board – someone who has shares in their retirement portfolio is also a shareholder.

What makes a shareholder?

• A shareholder owns shares in a company, making them a part owner.

• Shareholders are only invested in the financial circumstances of a company, as their profits increase as shares do.

• Despite “owning” part of a company, shareholders aren’t liable for a company’s debt if it goes bankrupt.

• Shareholders are allowed to vote on company practices. This is only likely to have an effect if you have a lot of shares or if it’s a community-owned or employee-owned company.

• Unlike a stakeholder, a shareholder’s investment in a company is short-term.

  • Shares are liquid, which means that they can be sold at the shareholder’s leisure. So if they feel that they can make a profit with them, or if they’re just not convinced about the direction the company’s taking, they can sell them whenever they wish.

In the recent past, company decision-making has been focused on being accountable to its shareholders, which means that its decisions were based on profit maximization. There’s currently a debate in the business world as to whether it’s more important to focus on shareholders or stakeholders.

Stakeholder vs. Shareholder FAQ

1. What are the rights of shareholders and stakeholders in a company?

   Shareholders have the right to vote on major company decisions; the uninfringed right to transfer the ownership of their shares; collect dividends from their shares; and the right to sue if the company behaves wrongfully.

   Shareholders may also have other rights depending on the company and where it’s incorporated, and the weight of their displeasure or vote is going to depend on the number of shares they own.

   Stakeholders’ rights aren’t clear-cut, as it would depend on the type of stakeholder. For instance, if the stakeholder is another company, they aren’t going to have any direct rights.

   Neither is the general public. What rights employees have is going to depend on the company rules, what state they live or work in, and what position they hold.

2. What are the similarities between corporate management and shareholders?

   Shareholders are often the highest echelon of control in a company, though they don’t work for the company. Those who own the most shares are often the ones who make decisions on the direction of the company, as well as who the directions are – they usually also select the CEO.

   Corporate managers, on the other hand, work for the company. They are stakeholders without necessarily being shareholders. They’re invested in the company’s success in ways just beyond financially. They’re also the ones who carry out the board and CEO’s decisions.

3. How do stakeholders affect your company?

   How a stakeholder affects your company is going to depend on what type of stakeholder they are. For instance, employees affect the company through their work. Their dedication or loyalty to the company can have an impact as well, especially in terms of whether or not they choose to stay or take their expertise elsewhere.

   Suppliers or buyers can also have a large impact on a company by either altering their product or what they wish to buy or by changing a contract. If your company is reliant on buying or selling, having a regular buyer or seller is a must.

   The general public can affect your company by protesting, boycotting, or lawsuits. Depending on public relations and what the company does, as well as the laws in the area, the public itself can have a major impact on profits and company image.

   Lastly, shareholders are also stakeholders. They have the ability to vote on company decisions, sue if the company acts wrongfully, and sell their shares.

4. Should companies prioritize shareholders or stakeholders?

   Whether shareholders or stakeholders should be prioritized is a matter of debate in the business world. Those who say that shareholders should take precedence say that a company’s purpose is to make money and that pursuing profits is a natural choice.

   The other side claims that companies have a responsibility to the nation and world they exist in and that they should consider the impact of what they do on employees, the public, and other companies.

5. Are shareholders the same as investors?

   No, shareholders aren’t the same as investors. Both shareholders and investors are engaged financially in a company. Investors, however, are most often a part of a company at the beginning.

   They put money in to help the company get started and get to a point where it’s profitable. May investors get shares as a result and will state shareholders later on. Shareholders, however, are just anyone who owns shares in a company.

Author

Di Doherty

Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.