What is the difference between a shareholder and a stakeholder?

By Ayton MacEachern AAA
A:

Shareholders are stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a company through stock ownership, while a stakeholder is interested in the performance of a company for reasons other than just stock appreciation.

Stakeholders could be:

  • employees who, without the company, would not have jobs
  • bondholders who would like a solid performance from the company and, therefore, a reduced risk of default
  • customers who may rely on the company to provide a particular good or service
  • suppliers who may rely on the company to provide a consistent revenue stream

Although shareholders may be the largest stakeholders because shareholders are affected directly by a company's performance, it has become more commonplace for additional groups to be considered stakeholders, too.

Corporate Social Responsibility
The new field of corporate social responsibility (CSR) has encouraged companies to take the interests of all stakeholders into consideration during their decision-making processes instead of making choices based solely upon the interests of shareholders. The general public is one such stakeholder now considered under CSR governance. When a company carries out operations that could increase pollution or take away a green space within a community, for example, the general public is affected. Such decisions may be right for increasing shareholder profits, but stakeholders could be impacted negatively. Therefore, CSR creates a climate for corporations to make choices that protect social welfare, often using methods that reach far beyond legal and regulatory requirements.

(For more information on corporate social responsibility, be sure to check out our related article Using Social Finance To Produce A Better World.)

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