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 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 external stakeholder now considered under CSR governance. When a company carries out operations that could increase environmental 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.)

RELATED FAQS
  1. Why has emphasis on corporate governance grown in the 21st century?

    Understand the key features of corporate governance and the factors that have led it to grow significantly in importance ... Read Answer >>
  2. What's the difference between agency theory and stakeholder theory?

    Learn how agency theory and stakeholder theory are used in business to understand common business communication problems ... Read Answer >>
  3. How do you craft an effective social responsibility policy?

    Craft social responsibility policies to brand the business, provide direction for the company's mission and motivate employees ... Read Answer >>
  4. How does a merger affect the shareholders?

    Explore the effect of a merger and understand how the process affects shareholders of the newly merged firm in terms of stock ... Read Answer >>
  5. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  6. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
Related Articles
  1. Small Business

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...
  2. Managing Wealth

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  3. Investing

    Who is a Shareholder?

    A shareholder is a person, company or other entity that owns at least one share of a company’s stock.
  4. Investing

    What is the Shareholder Equity Ratio?

    The shareholder equity ratio shows how much money shareholders will receive if a company has to liquidate its assets.
  5. Investing

    Key Financial Ratios to Analyze the Hospitality Industry

    Understand the hospitality industry and the types of companies that operate within it. Learn about key financial ratios used to analyze the industry.
  6. Investing

    Why Do Companies Care About Their Stock Prices?

    Read on to learn more about the nature of stocks and the true meaning of ownership.
  7. Managing Wealth

    Knowing Your Rights As A Shareholder

    Common shareholders typically enjoy six main rights.
  8. Small Business

    Governance Pays

    Learn about how the way a company keeps its management in check can affect the bottom line.
RELATED TERMS
  1. Stakeholder

    A party that has an interest in an enterprise or project. The ...
  2. Corporate Capital

    The assets a business possesses that can serve as an income shock ...
  3. Corporate Governance

    The system of rules, practices and processes by which a company ...
  4. Closely Held Shares

    The shares in a publicly traded company held by a small number ...
  5. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  6. Shareholders' Agreement

    An arrangement among a company's shareholders describing how ...
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center