Introduction of Shareholders and Stakeholders
Shareholders and stakeholders are investors in a corporation. They seem similar but their way of investing in a company is quite different.
Role of Shareholders
The role of shareholders has a stake in a corporation and can be termed stakeholders but stakeholders are not always shareholders. A company has shares of stock and a shareholder owns a part of the share, on the other hand, stakeholders have larger needs than the shareholders.
A stakeholder has an interest in the performance of a corporation for reasons other than stock performance or stock appreciation.
A better understanding of the role of shareholders
An individual, company, or institution that owns at least one share of a company can be termed as a shareholder and therefore has an interest in the performance of the company.
When the share prices of a stock rise, a person having shares of the stock gets benefitted. Shareholders also hold the right to vote and to affect the management of a corporation. The shareholders own a part of the corporation but they have no business with the debts of the company.
Role of Stakeholders
Role of stakeholders are individuals, groups, or organizations that have an interest in the outcome of a project or business. The outcome of a business impacts a stakeholder in that business.
Stakeholders can be within the company or outside of the company. Stakeholders can have a positive as well as a negative influence on the outcome of a project or business because they have the power to influence a company.
Stakeholders are owners as well as shareholders. Employees of a company, bondholders, customers, suppliers, and vendors can be stakeholders.
A better understanding of the role of stakeholders
A stakeholder is generally used to describe a person or group of people who have an interest in a company. Stakeholders can be affected and can be affected by the organization’s actions and policies.
Some common examples of stakeholders are creditors, directors, employees, government, etcetera.
Stakeholders have different proportions of stake in a company, they are all not equal. Stakeholders participate in a business involuntarily or voluntarily and their decisions affect the business and they are affected by the outcome of a business.
They contribute largely to the wealth-creating capacity and therefore are the main beneficiaries and risk bearers as well.
Major differences between shareholders and stakeholders
- Shareholders can be individuals or organizations and hold one or more shares of a company.
- Stakeholders can be individuals or organizations that have an interest in the outcome of a business and they also take an active part in the functioning of the company.
- Shareholders are directly impacted by the events in a company.
- Stakeholders are directly and indirectly affected by the outcome of events in a company.
- Shareholders can be stakeholders in a company.
- A stakeholder cannot be a shareholder in a company.
- Shareholders have an interest in monetary benefits.
- Stakeholders can and cannot have an interest in monetary benefits.
- Shareholders have an interest in the return on investment.
- Stakeholders have an interest in the performance of the company.
These are the major differences between shareholders and stakeholders as shown above.
FAQs
What’s an illustration of a shareholder?
For illustration, a person could become a common shareholder of The Allstate Corporation( each) by buying at least one common share of the stock. Assume the stock price is 95. The investor buys the number of shares they want, multiplied by 95. They’re now a common shareholder.
What are the 3 types of shareholders?
Types of Shareholders:
1. Equity Shareholder
2. Preference Shareholder
3. Debenture holders