Shareholder vs Stakeholder: What is the Difference?

Shareholder vs Stakeholder

In some cases, we used to use “shareholder” and “stakeholder” interchangeably. However, both involvement and the stakeholder’s investment in a company differ very significantly. Stakeholders are always shareholders, while shareholders are not necessarily stakeholders. In the article “Shareholder vs. Stakeholder: What is the Difference?”, we will discuss this topic briefly with you.

The role of shareholder

A shareholder is a party or an individual who owns at least one share of the company, and therefore he has an interest financially in the profitability of the company. This might be an individual, a company, or an institution. Shareholders have a right to vote on how the company is operated. If the company does well and its stock price grows, the shareholder’s value rises; if the company does poorly and its stock price decreases, the shareholder’s value falls.

The role of stakeholder

The policies and objectives of a corporation can impact or be affected by a stakeholder. A stakeholder has an influence in the success or failure of an organization. There can be internal or external stakeholders. Internal stakeholders have a direct connection to the firm because they work for it, own it, or invest in it. External stakeholders, on the contrary, are people that do not have a direct relationship with the firm but may be affected by its activities. Suppliers, creditors, and community and public groups are examples of external stakeholders.

Shareholder vs Stakeholder

A shareholder is a stakeholder by its definition. However, a shareholder is not always a stakeholder. The difference between a shareholder and a stakeholder depends on the individual’s/institurions relationship with the organization or company.

Shareholders have a shorter association with a corporation than other stakeholders. At any moment, a shareholder can sell their shares, hence their position in the firm. This might happen for several reasons. For instance, if the firm’s stock price rises, shareholders may decide to sell their shares for a profit. Alternatively, if the company’s worth decreases and the stock price declines, shareholders may sell to reduce their losses.

Stakeholders are usually more invested in the firm than their shareholder counterparts. The ordinary firm employee, for example, takes more risk than a shareholder who can sell their stock whenever they choose.

Differences in their viewpoints

Both shareholders and stakeholders have viewpoints that differ from each other. Their perspectives are related to their interest in the company.

Shareholders expect the company’s management to engage in actions that benefit stock prices and the value of dividends paid to shareholders. Shareholders would also like to concentrate on expansion, acquisitions, mergers, and other activities that boost profitability and overall financial health.

On the other side, stakeholders are concerned with long-term viability and improved service quality. Employees, for example, maybe more concerned with rising salaries and compensation than with increased profitability. Suppliers may want prompt payment for items provided to the firm and better prices for their goods and services. Customers will like to receive better service.

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