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.)

RELATED FAQS

  1. 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 ...
  2. Why is a shareholder rights plan called a "poison pill?"

    Discover why shareholder rights plans are often called "poison pills" to fight hostile takeovers and give smaller corporations ...
  3. How can investors influence the c-suite?

    Learn how investors can influence corporate management. Find out about methods that investors use to take control and some ...
  4. What is the difference between CI (competitive intelligence) and competitive analysis?

    Understand the difference between competitive intelligence and competitive analysis. Learn why a company conducts both types ...
RELATED TERMS
  1. Business Judgment Rule

    A legal principle which grants directors, officers, and agents ...
  2. Separation Of Powers

    An organizational structure in which responsibilities, authorities, ...
  3. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...
  4. Registered Holder

    Shareholders who hold their shares directly with a company.
  5. Duty Of Loyalty

    A director's responsibility to act at all times in the best interests ...
  6. Duty Of Care

    One of two primary fiduciary duties of directors, the duty of ...

You May Also Like

Related Articles
  1. Investing News

    A New Corporate Governance Initiative ...

  2. Stock Analysis

    Intel Doesn't Need New Management

  3. Stock Analysis

    Will Spinoffs Give American Capital ...

  4. Stock Analysis

    Will American Airlines Fall Back To ...

  5. Stock Analysis

    Qualcomm's New Buyback Program Is Well-Timed

Trading Center