Both shareholders and stakeholders are generally considered synonyms and most often used interchangeably in the business world. But if you take a closer look at both, they are not the same. Read on to find out the key difference between shareholders and stakeholders.
Shareholders are the people who hold shares (equity stocks) with a vested interest in the company. Shareholders can be stakeholders, while the stakeholders can’t necessarily be shareholders. Stakeholders have a long-term interest in the overall performance of the company, except the capital appreciation.
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Difference Between Shareholders and Stakeholders
Both shareholders and stakeholders are the company’s investors, however, their investment and interests in a company are not the same. Let’s have a look at the major factors that make them different.
Shareholders own certain parts of the company by getting equity stocks. They earn profit through dividends and capital appreciation in case if the company makes a profit and the index price of the share increases. Conversely, if a company makes a loss, the share price and the return of shareholders also decrease.
Stakeholders have interest in the company’s performance. Stakeholders can be customers, employees and suppliers of the company. Under CSR governance, the general public is also considered stakeholders.
Monetary performance, like profit and loss, of the company, directly impacts the shareholders as it shows the stock prices of the company. It implies that shareholders are affected by the company’s outcome. Whereas stakeholders may be directly or indirectly affected by the performance of the company.
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The shareholders always intend a company to carry on activities that positively affect the price of the company’s stocks or increase dividends or activities that improve the financial outcome of the company. On contrary, stakeholders are more concerned about the long-term sustainability of a company other than the financial aspect. We can say that shareholders are more concerned about quantity while stakeholders focus on quality.
Conflict of Interest
The Company may face difficulty while prioritising the interest of shareholders and stakeholders. Being the key performers, shareholders want a company to focus on increasing its monetary outcome. Whereas, stakeholders want to boost the company’s value and its overall performance without considering the profitability. Nowadays, companies are focusing more on stakeholder value as a part of corporate social responsibility (CSR).
Quick Sum Up
In conclusion, we can say that the shareholders are the company’s owners while the stakeholders are the interested parties of the company. Shareholders are the subset of the stakeholders.
Equity shareholders and preference shareholders are the types of shareholders. On the other hand, stakeholders include everything other than shareholders like suppliers, owners, investors, creditors, employees and customers.
The main difference between the both is that shareholders focus on the profitability of their investment whereas stakeholders focus on the company’s performance.
Now that you have got a solid grasp of the difference between shareholders and stakeholders. You have understood that business success and development can’t only be relied upon the money. As shareholders only provide money, the rest of the efforts are done by the stakeholders. The business gets its outcome in the form of wealth and welfare through the collective efforts of stakeholders. Therefore, both need to work correlatively for the success and growth of a business.
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Disclaimer: This blog provides general information on the above topic.