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. Can I still set up an SEP if one of my employees refuses to participate?

    You can establish the SEP IRA, even if the employee refuses to participant. However, you would need to establish an IRA for ...
  2. I get multiple mailings to my house from companies that my spouse, children and I ...

    It's not uncommon for there to be more than one investment account holder in one household. If multiple members of your household ...
  3. I have a small business, and I'm considering setting up an SEP IRA. What are leased ...

    Generally, a leased employee is the employee of an outside organization from which you lease the employee's services. For ...
  4. If a company undergoes an acquisition can an employee withdraw 401(k) funds tax free?

    Although the participant may be eligible to withdraw the funds if a plan is terminated as a result of an acquisition or other ...
RELATED TERMS
  1. Protected Cell Company (PCC)

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

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

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

    One of two primary fiduciary duties of directors, the duty of ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Adverse Domination

    A legal doctrine that allows regulators to bring litigation against ...

You May Also Like

Related Articles
  1. Investing Basics

    Enterprise Resource Planning System: ...

  2. Investing Basics

    How To Calculate Goodwill

  3. Investing Basics

    Using Appreciative Inquiry To Solve ...

  4. Investing Basics

    The Basics Of Value Chain Analysis

  5. Investing Basics

    Top Tools for ERP Enterprise Resource ...

Trading Center