Difference Between Shareholders and Stakeholders

Shareholder is a person, who has invested money in the business by purchasing shares of the concerned enterprise. On the other hand, stakeholder implies the party whose interest is directly or indirectly affected by the company’s actions. The scope of stakeholders is wider than that of the shareholder, in the sense that the latter is a part of the former. Stakeholders represents the entire micro-environment of the business.

While shareholder own the company’s share by paying the price for it, hence they are the owners of the company. In contrast, stakeholders, are not the owners of the company, but are they are the parties that deal with the company. In the given article excerpt, we’ve broken down all the important differences between shareholders and stakeholders.

Content: Shareholders Vs Stakeholders

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

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 organization. They are the interested parties who help the organization to exist. In the absence of stakeholders, the organization 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
  • Owners
  • Managers
  • Employees
  • Trade Unions
• External Stakeholders
  • Suppliers
  • Creditors
  • Government and its agencies
  • Customers
  • Society
  • Competitors

Conclusion

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 organization irrespective of its size, nature, and structure are accountable to Stakeholders.