Don’t Get Confused Between Stakeholders And Shareholders

While all shareholders are stakeholders in a company, all stakeholders are not necessarily shareholders. Understand the reasons behind this.


Investments in listed companies are majorly made through the stock market. When you invest in a firm’s shares, you become a shareholder of the company and can participate in its functions in the same capacity. As you become shareholders, you also become stakeholders of that company. 

Although their names seem similar, shareholders and stakeholders’ investments in a company are entirely different. Stakeholders are always the company’s shareholders, but shareholders are not always stakeholders.

Shareholders are part of a listed company through the ownership of shares. On the other hand, participants via a stakeholding relationship in a company are interested in the company’s performance for reasons other than financial performance or stock valuation. These reasons translate into a stakeholder’s more vital need for a company’s success over a longer term.

Stakeholders

For a company, its stakeholders can be the owners and shareholders as well as the employees of the company. Bondholders who own company-issued debt and customers who may rely on the company to provide a particular good or service are also considered stakeholders of any institution.

Although a shareholder may be the most significant type of a stakeholder because s/he is impacted directly by an organisation’s execution, different groups that are part of an organisation are also considered stakeholders.

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Shareholders are always stakeholders in a firm, but the vice-versa is not true - stakeholders are not always shareholders.

Shareholders

Shareholders of a company can be a person or an investment organisation that owns at least some part of the company’s shares. In this event, a company’s profits directly and primarily become the goal for shareholders. A shareholder only invests in a company with the hopes of increasing their portfolio value and wealth. 

Shareholders generally do not concern themselves with the company’s secondary benefits and long-running values. They also have a significant influence and voting rights in the company. While shareholders own the company, they are not directly responsible for its debts. 

Don't Get Confused Between Stakeholders And Shareholders

 

Key Differences

Shareholders can sell a company’s shares and buy different ones in search of more profit as they do not have long binding interests in one company. On the other hand, the stakeholders have to stick with the business for a long time as they are part of it for more than just profits. 

If a company suffers financial setbacks, the businesspeople in its supply chain might be hurt if the company no longer use their services and products. Likewise, the company’s employees, who are stakeholders and depend on it for wages, might end up suffering job losses in the event of bankruptcy. 

Shareholders own shares and equity in a corporation. A stakeholder wants the company to thrive for reasons other than profits. Shareholders do not need the company’s perspective to succeed and can sell shares at any time. But a stakeholder joins a company for the long haul and needs to see the company prosper on all fronts.

Aakash Sharma
Aakash Sharma
Aakash writes on Startup Ecosystem, Policies, Legal and Regulatory aspects of business planning. An alumnus of Delhi University, he is assistant editor at Dutch Uncles.

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