Stakeholder vs Shareholder: How They’re Different & Why It Matters

Exhibit 3 breaks down the strategy of varying the time horizon of executive pay and, specifically, using time- based grants into three key areas. When setting the time horizon and structure of rewards, the performance period, the vesting period, and any mandatory holding periods are important dimensions for company boards and investors to consider. Therefore, stakeholders can be internal, such as employees, shareholders and managers—but stakeholders can also be external. They are parties that are not directly in a relationship with the organization itself, but still, the organization’s actions affect it, such as suppliers, vendors, creditors, the community and public groups. Basically, stakeholders are those who will be impacted by the project when in progress and those who will be impacted by the project when completed. It’s important to understand the unique requirements of each of your stakeholders.

They ensure that the organizational work environment remains dynamic, stimulating, and rewarding and there are good working conditions available in the organization so that the organization can perform well. Stakeholders have an interest in the business, but they don’t necessarily own it, whereas stockholders partly own the business through shares and stocks. On the other hand, stakeholders are focused on much more than just finances.

However, in privately-held companies, sole proprietorships, and partnerships, the creditors have a right to demand payments and auction the properties of the owners of these entities. The investments that shareholders hold in a company are usually liquid and can be disposed of for a profit. Investors typically buy a portion of a company’s shares with the hope that these shares will appreciate so they will earn a high return on their investment. The shareholder may sell part or all of his shares in the company, and then use the money to purchase shares of another company or use the money in an entirely different investment. The terms “stakeholder” and “shareholder” are often used interchangeably in the business environment. Looking closely at the meanings of stakeholder vs. shareholder, there are key differences in usage.

A Stakeholder is a party that can influence and can be influenced by the activities of the organization. In the absence of stakeholders, the organization will not be able to survive for a long time. With project management software, you also have a central workspace for updates. Plus, built-in visual timeline tools such as Gantt charts make it easy to get everyone on the same page. For internal stakeholders, they are important because the business’s operations rely on their ability to work together toward the business’s goals. Since labor costs are unavoidable for most companies, a company may seek to keep these costs under tight control.

Difference Between Shareholder and Investor

Stakeholders are individuals, groups or any party that has an interest in the outcomes of an organization. Stakeholders can be internal or external and range from customers, shareholders to communities and even governments. For example, if a company xero band is performing poorly financially, the vendors in that company’s supply chain might suffer if the company limits production and no longer uses its services. However, shareholders of the company can sell their stock and limit their losses.

  • Stakeholders are directly or indirectly impacted by the activities of the company, while stockholders are directly impacted.
  • Shareholders and stakeholders can often have overlapping priorities, but they aren’t the same.
  • Yet say-on-pay voting at publicly listed companies has arguably had the opposite of its intended effect, driving up executive compensation and showing little relationship to long-term shareholder interests.
  • Research suggests that having a long-term focus in pay plans leads to better long-term performance.
  • In Wrike, you can also create custom dashboards specific to a particular group of stakeholders, including shareholders.

The distinctions between groups are brought out in theories on shareholders and stakeholders. Shareholder theory suggests that the sole responsibility of corporations is to maximize profits for shareholders. Stakeholder theory, in contrast, is the idea that stakeholders should have priority and that the relationship between stakeholders and the company is more complex and nuanced. But a stakeholder’s relationship with a company can be more complex than that of a shareholder. Stakeholders can be company employees, suppliers, vendors, customers and even the local community. Shareholders are primarily interested in a company’s stock-market valuation because if the company’s share price increases, the shareholder’s value increases.

Difference Between Shareholders and Stakeholders

Stakeholders are interested in the company’s performance for a wider variety of reasons. A shareholder is any party—whether an individual, a company, or an institution—that has shares in a publicly owned company. Stakeholder is a broader category that refers to all parties with an interest in a company’s success.

Shareholder theory

In Wrike, you can also create custom dashboards specific to a particular group of stakeholders, including shareholders. Through these dashboards, both stakeholders and shareholders can see the progress of important projects, allocated budgets, and team workloads as well as risks. However, one thing they have in common is a need to be managed appropriately. Wrike helps you do just that by providing a centralized information repository and the tools to share and communicate effectively day to day with both shareholders and stakeholders. A stakeholder is anyone with an interest in the success of your organization or company. The shareholder concept approach argues that it is the primary responsibility of businesses to act in the interest of its owners – the shareholders.

The organizational stakeholders influence maximum the management of the organization specially the process of decision making. As per this classification, stakeholders can be (i) customers, (ii) suppliers, (iii) advisers, (iv) controllers, and (v) adversaries. These five categories of stakeholders are shown in Fig 1 and described below. Most people work with stakeholders on a day-to-day basis, but they rarely encounter company shareholders.

Dividend per Share

A shareholder owns part of a public company through shares of stock, while a stakeholder has an interest in the performance of a company for reasons other than stock performance or appreciation. (They have a “stake” in its success or failure.) As a result, the stakeholder has a greater need for the company to succeed over the longer term. On the other hand, stakeholder theory helps you act responsibly towards your employees, customers, and business partners. By prioritizing your immediate project stakeholders (both internal and external), you can create better work environments that promote both employee well-being and customer satisfaction.

Therefore, CSR encourages corporations to make choices that protect social welfare, often using methods that reach far beyond legal and regulatory requirements. For example, a shareholder might be an individual investor who is hoping the stock price will increase because it is part of their retirement portfolio. Shareholders have the right to exercise a vote and to affect the management of a company. Shareholders are owners of the company, but they are not liable for the company’s debts. For private companies, sole proprietorships, and partnerships, the owners are liable for the company’s debts. Investor on the other hand is a very broad term, and even a person who has invested in fixed deposits or a bank account is called an investor.

What is a stakeholder?

They serve and are employed by the business; therefore, the business directly impacts them. Some examples of internal stakeholders include employees, the board of directors, project managers, owners, and investors. Whereas, external stakeholders are those who are outside of the organization. Examples include customers, suppliers, creditors, competitors, society, and the government.

Mini steel plants and micro steel plants are rivals for integrated steel plants since they compete for the same resources namely raw materials and technical manpower. The conflicting regulations put further constraints on the management towards decision making. Management is forced to assess the net effect of the multiple regulations on the work flow, products marketed, staffing patterns and job description and fine tune the decision making by changing the managerial style of functioning. Further there are the organizational values, ethics, vision, objectives, and polices which controls the actions of the management since it is obligated to follow these norms of the organization.

Add a comment