Difference between Shareholder and Stakeholder

Key Difference: Shareholder, as the name signifies, refers to an individual or an organisation that owns a share in a corporation or mutual funds. A stakeholder is someone who has a vested interest in an organization and its activities. A stakeholder may be affected by a corporation directly or indirectly. All shareholders can be considered as stakeholders. However, stakeholders may or may not include shareholders.

Many people tend to think that a shareholder is the same as a stakeholder. However, they both are quite different from each other. Shareholder, as the name signifies, refers to an individual or an organisation that owns a share in a corporation or mutual funds. The term is used to denote the owner of shares in an organization or in a company. Therefore, they can also be considered as the part-owners of a business. ‘Shareholder’ basically refers to the holder of a share and the share is generally defined as an equity share in a business. A shareholder can be an individual or can also be a large financial institution. 'Majority shareholder' is the one who holds more than half the value of a business. A shareholder can buy the shares from the corporation itself or from an existing shareholder. Shareholders have been provided many rights like – right to vote at the shareholder’s meetings, share in the profits of the corporation, etc. The rights generally include:

  • To transfer the shares.
  • To get information of meeting of company, take part in it and vote.
  • To audit the receipts and may also ask for copies.
  • To receive or obtain annual reports, auditor’s report, profit and loss account and balance sheet’s copies.
  • To sign the proposal of liquidation which is done by Court.
  • To participate in the committee for appointment of a liquidator at the time of voluntary liquidation of company.

On the other hand, stakeholders are the persons who are affected by the company’s operations (actions, objectives and policies). They are interested in the performance of the company. They may include stockholders, managers, workers and many more. A very accurate definition of a stakeholder was given by Freeman in 1984 as - ‘Any group or individual who can affect or [be] affected by the achievement of an organization’s objectives’. Stockholders are regarded as the largest stakeholders as they are greatly affected by the performance of a company. They may also include people for various reasons like academic, philosophical, or political. Therefore, stakeholders may also include people that might not get directly affected by the functioning of a company. Primary stackholders include owners, managers, workers, etc. who have a direct stake in the organization and its success. On the other hand, secondary stakeholders include consumers, government, civil society, etc. who have a public or special type of stake in the organization.

Comparison between Shareholder and Stakeholder:

 

Shareholder

Stakeholder

Definition

Shareholder, as the name signifies, owns a share in a corporation or mutual funds.

A stakeholder is someone who has a vested interest in an organization and its activities.

Types

  • Individual investors – it refers to the individuals who invest their own money.
  • Institutional investors – it includes the organizations that invest the money of others like banks, insurance companies, etc.
  • Primary stakeholders – They are directly affected. A rent control policy, for example, benefits tenants, but may hurt landlords.
  • Secondary stakeholders - They are indirectly affected, either positively or negatively. The effects may not be influenced directly. However, the intensity of the effect may vary from situation to situation.
  • Key stakeholders -  They might belong to either or neither of the first two groups; they are those who can have a positive or negative effect on an effort, or who are important within or to an organization, agency, or institution engaged in an effort. For example - The director of an organization might be an obvious key stakeholder.

Role

All shareholders can be considered as stakeholders

Stakeholders may or may not be shareholders

Type of involvment

Shareholders have a legal involvement concerning the rights to directly affect a company’s policies and actions.

Stakeholders have no such involvement with the company in any financial or legal way.

Attributes
  • They are mainly concerned with the company’s bottom line.
  • Generally, shareholders influence the company’s strategy, in order to increase the company’s stock value.
  • In a shareholder business model, needs and concerns of four parties: investors, employees, suppliers, and customers are given immense importance.
  • Mostly, incorporated stakeholders can only influence a company indirectly.
  • All stakeholders are generally not entitled to the same considerations.
  • In a stakeholder business model, a company is influenced by the needs and concerns of all people, groups, and places affected by the company.

Image Courtesy: moneylife.in, ec.europa.eu

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