Both shareholders and stakeholders are closely interrelated in the business world and are considered alternatives. However, closer insights show that they are not the same. In this blog, you will come to know about the difference between shareholders and stakeholders.
Shareholders own shares (equity stocks) in a company and have a personal interest in it. Stakeholders can be shareholders, but shareholders aren’t always stakeholders. Stakeholders, except the capital appreciation, have a long-term stake in the company’s overall growth. Stakeholders are the company’s interested parties, while shareholders are the company’s owners. The term “shareholder” refers to a subset of the term “stakeholder.”
Types Of Shareholders
There are two (main) types of shareholders:
- Preference shareholders
Stakeholders, on the other hand, include everyone who isn’t a shareholder, such as suppliers, owners, investors, creditors, employees, and customers.
The Difference between Shareholders and Stakeholders
Following are the key differences between shareholders and stakeholders. Shareholders and stakeholders are both company investors, but their interests and investments in a company are not similar.
1. Conflict Of Interest
While prioritising the interests of shareholders and stakeholders, the company may confront difficulties. Shareholders, as key performers, expect a company to focus on increasing its quarterly earnings. On the other hand, stakeholders seek to increase the company’s value and overall performance without any concern for profitability. As part of Corporate Social Responsibility, companies focus more on stakeholder value.
The company’s budgetary performance, such as profit and loss, directly impacts the shareholders because it reflects the company’s stock prices. It shows that the company’s revenue has an impact on shareholders. Stakeholders, on the other hand, maybe affected directly or indirectly by the company’s performance.
Shareholders always want an enterprise to engage in activities that boost stock prices, enhance dividends, or improve the company’s financial performance. Stakeholders, on the other hand, are more worried about a company’s long-term sustainability than its financial performance. In addition, shareholders are more interested in quantity, whereas stakeholders are concerned with quality.
By getting equity stocks, shareholders own certain parts of a company. They make money via dividends and capital appreciation if and only if the company generates a profit and the shares’ index price increases. In contrast, if a company makes a loss, the share price and shareholder return both falls. Stakeholders are interested in the performance of a company. Customers, employees, and suppliers of the company might all be considered stakeholders. The entire public is considered a stakeholder under CSR governance.
With the highlighted details, we hope now you have a better understanding of the difference between shareholders and stakeholders. You’ve realised that financial success and development are not the only things that determine the company’s success. Because shareholders only contribute money, stakeholders are responsible for the remainder of the work. Through the combined efforts of shareholders and stakeholders, the business achieves its goal of prosperity and welfare. Therefore, we can say that for the success and growth of the company, both must perform together.
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Disclaimer: This blog contains general information about shareholders vs. stakeholders.