Many people are unaware of the differences between shareholder and stakeholder. Due to this, they use them interchangeably or even as synonyms. The line of demarcation amidst the two terms is very thin and blurred; that is the reason of juxtaposition between them. Stakeholders include Shareholders or say shareholders occupy the maximum part of stakeholders. So, here in this article, you will find all the necessary points of differences between the two terms. Have a look.
Content: Shareholders Vs Stakeholders
|Basis for Comparison||Shareholder||Stakeholder|
|Meaning||The person who owns the shares of the company is known as a Shareholder.||The party, who is having a stake in the company is known as Stakeholder.|
|Who are they?||Owners||Interested Parties|
|What is it?||Subset||Super set|
|Company||Only a company, which is limited by shares have shareholders.||Every company or organization have stakeholders.|
|Includes||Equity shareholders, Preference shareholders||Shareholders, Creditors, Debenture holders, Employees, Customers, Suppliers, Government etc.|
|Focuses on||Return on investment||Performance of the company|
Definition of Shareholders
Every company raises capital from the market by issuing shares to the general public. The shareholder is the person who has bought the shares of the company either from the primary market or secondary market, after which he has got the legal part ownership in the capital of the company. He is the one who owns shares in the private or a public company. Share Certificate is given to every individual shareholder for the number of shares held by him.
Mere subscribing to shares does not amount to ownership of shares, until and unless shares are actually allotted to him. They are the people who directly affected by the activities of the company. In a company, there can be two types of shareholders.
- Equity Shareholders: The holders of the ordinary shares of the company. They have the right to vote in the Annual General Meeting (AGM). Moreover, at the time of the liquidation of the company they are repaid at the end.
- Preference Shareholders: Preference Shareholders are the one who gets priority over Equity Shareholders in the payment of dividend at a fixed rate and repayment of capital it the event of winding up of the company.
Definition of Stakeholders
A Stakeholder is a party that can influence and can be influenced by the activities of the organisation. They are the interested parties who help the organisation to exist. In the absence of stakeholders, the organisation will not be able to survive for a long time.
As per the traditional governance model, the company’s management is accountable only to the shareholders. But nowadays, this scenario has been completely changed because many corporations are having the opinion that apart from the shareholders, many other constituents exist in the business environment and the management is answerable to them also. As the business operates in an environment and there are many factors which affect it. Similarly, the steps taken by the entity will also have a positive or a negative impact on its constituents. These constituents, are classified in the following categories:
- Internal Stakeholders
- Trade Unions
- External Stakeholders
- Government and its agencies
Key Differences Between Shareholders and Stakeholders
The following are the differences between shareholders and stakeholders:
- The person holding the shares of the company is known as Shareholders. The party having a stake in the company or organisation is known as Stakeholder.
- Shareholders are the owners of the company as they had bought the financial shares, issued by the company. Conversely, Stakeholders are the interested parties who affect or gets affected by the company’s policies and objectives.
- Shareholders are a part of the Stakeholders. It can also be said that shareholders are stakeholders, but the stakeholders are not necessarily the shareholders of the company.
- Shareholders lay emphasis on the return on their investment made in the company. On the other hand, Stakeholders focuses on the performance, profitability, and liquidity of the company.
- The scope of stakeholders is comparatively wider than the shareholders because there are other constituents also apart from shareholders.
- Only the company limited by shares have shareholders. However, every company or organisation have stakeholders, whether it is a government agency, nonprofit organisation, company, partnership firm or a sole proprietorship firm.
Therefore, it can be clear from the above discussion that shareholder and stakeholder are two different terms. Hence, should not be confused while using them. Shareholders are just the legal owners of the company, who have got the ownership by purchasing the shares of the company. Stakeholders is a little bigger term than Shareholders, which includes all those factors which have an affect on the business. Not only business doing entity have stakeholders, but every organisation irrespective of its size, nature, and structure are accountable to Stakeholders.