Difference Between Shareholders and Stakeholders

Shareholders vs Stakeholders

Shareholders and Stakeholders are people who have some interest in the company in which they have either financial or non financial stake. But to differentiate between shareholders and stakeholders, we have to understand the meanings of two words. As the name implies, shareholders are people who have some shares or stock of the company in their name and as such are part owners of the company. On the other hand, stake holders are all those who have an interest in the company whether they are financially involved with the company or not. For example employees of a company may not possess any shares of the company and yet they are said to be stakeholders in the company. Even their families are stake holders in the company.

Shareholders

To raise capital from the market, companies float their shares through share market and it can be purchased by common people. These people are shareholders or stockholders and are actually own a part of the company. These are the people who have actually given money to the company either for day to day operations or to start a new venture. As such, they can be said to be the biggest stakeholders as they are directly affected by the performance of the company. If the company makes profit they get bonus and dividends, but if the company goes into a loss, the value of shares of the company goes down reducing the stake of shareholders in the company.

Stakeholders

A stakeholder is anyone who has direct or indirect interest in the company. If a person is affected by the performance of a company, he is a stakeholder. For a company, stakeholders could be employees, their families, suppliers of raw materials, buyers of finished products, end customers, and by large entire community. There are examples of organizations where there are no shareholders but only stakeholders such as a University. In a University, there are no shares and hence no shareholders but there is a long list of stakeholders including professors, students, students’ families, tax payers and the society in its entirety.

Difference between Shareholders and Stakeholders

All shareholders in a company are stakeholders but all stakeholders are certainly not shareholders. Those having financial interest in the company are shareholders or stockholders as they are directly affected by good or poor performance of the company. Employees of any company would be without jobs if there was no company, and hence they are stakeholders but they do not have any shares and hence are not shareholders.

Corporate social responsibility (CSR) dictates that any company should base his decisions taking the interest of all stake holders in mind rather than concentrating just upon its shareholders. Today, general public is also considered to be stakeholders in companies and this is why if any action of the company creates pollution or reduces greenery, it is stopped in its tracks by courts or the administration.

Thus we see that though for financial considerations, shareholders are a group that decides the financial policies of any company, but ultimately all companies are answerable to their stakeholders even more than their shareholders.