A:

Shareholders are always stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a public company through shares of stock (hence the name), while a stakeholder has an interest in the performance of a company for reasons other than stock performance or appreciation.

Who are Stakeholders?

Stakeholders can be:

  • employees who would not have jobs without the company
  • bondholders who own company-issued debt (and want it to live up to that obligation, obviously)
  • customers who may rely on the company to provide a particular good or service
  • suppliers and vendors who may rely on the company to provide a consistent revenue stream

Although shareholders may be the largest type of 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 public at large 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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