Stakeholder vs Shareholder

Stakeholder vs Shareholder

Prerna

2 July 2021

General Stakeholder Management

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Often when it comes to investing in an organization, or being invested, we hear the words “stakeholder” or “shareholder”. As similar as they sound, in practice their definition of involvement in an organization is vastly different.

In the case of shareholders, they are always stakeholders in an organisation or business, but stakeholders are not always shareholders. The key difference between the two comes down to the fact that a shareholder owns a part of a public company through stock. While stakeholders can also own shares, shareholders are not bound to the organisation in the same way stakeholders are, who often have multiple interests other than stocks.

Shareholders can sell their stock and purchase different shares, but stakeholders cannot easily steer their way out of the organisation’s influence, as they have a longer-term relationship with the company. For example, if a company performs poorly financially, the vendors, employees and customers or clients will be impacted. But for a shareholder, they can sell their stocks and leave before the impact affects them too severely. In this scenario, it is the stakeholders who do not have many options to leave. But even if they leave or are forced to leave (such as employees losing their jobs) they are still impacted and cannot negate the effects the organisation has on them.

While stakeholders have a “stake” or interest in an organisation’s decisions, plans, and financial stability, shareholders may often only care for the latter. Despite this, stakeholders can also hold the power to impact the organisation as much as they are impacted by the organisation’s decisions.

It is for this reason that organisations are increasingly acknowledging how critical it is for them to engage with stakeholders. Shareholders do not hold the same power over a business the way stakeholders do. Whether it is internal or external stakeholders, with how intricately their influence is woven into an organisation’s structure, they can sometimes make or break important decisions for a business and its projects.

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