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Stakeholders Vs. Shareholders: Key Differences
Stakeholders and shareholders are two important groups that business leaders need to consider when making major decisions. But there are some key differences between these two groups that are important to understand. In this post, we’ll explore stakeholders vs. shareholders and how their roles differ.
Table of Contents
Defining Stakeholders
A stakeholder is any person or entity that has an interest in or is affected by a business. Common stakeholders include:
- Employees
- Customers
- Suppliers
- Communities
- Government agencies
Essentially, a stakeholder is anyone who is impacted by the actions and decisions of a business. A business has a broad range of stakeholders, each with distinct interests and concerns.
A shareholder is a person, company or institution that owns at least one share of a company’s stock. Shareholders have a financial stake in the company and an interest in seeing the value of their shares increase.
The only interest that shareholders have is financial return. They want to see business decisions that will lead to increased share prices and dividends.
While stakeholders and shareholders are both groups that business leaders need to consider, there are a few key differences:
| Stakeholders | Shareholders | |
| Definition | Any group or individual affected by or with an interest in a company’s actions (employees, customers, partners, communities, etc.) | Individuals or entities that own a company’s stock |
| Key Interest | Diverse interests depending on stakeholder (fair pay, quality products, community impact, etc.) | Financial performance and maximizing the value of their shares |
| Relationship to Company | Can be internal or external | External owners |
| Priorities | Often have conflicting needs and interests | Largely united in driving profits and share price |
| Value Provided | Vital services, labor, partnerships, patronage, trust, social license to operate | Capital investment |
| Time Horizon | Interests in short-term and long-term health of company | Focus on short-term returns and immediate share price |
- Stakeholders have a broader range of interests beyond just financial returns, while shareholders have a narrow focus on financial performance.
- Stakeholders include both internal and external groups affected by the business, while shareholders are external owners of the company.
- Stakeholders may have conflicting interests that need to be balanced, while shareholders are (for the most part) unified in wanting to maximize investment returns.
- Businesses have obligations to consider their impact on stakeholders, not just shareholders. But in some cases, shareholders’ interests may be prioritized.
- Stakeholders provide value to the company in many ways, while shareholders only provide capital investment.
In summary, shareholders provide an important source of financing and ownership. But stakeholders offer a much broader range of value and interests that leaders also need to manage carefully. Smart companies look for win-wins that provide returns for shareholders while also addressing stakeholder needs.
Implications for Leaders
Business leaders need to make decisions factoring in obligations both to shareholders and stakeholders. This includes:
- Communicating openly and regularly with both groups.
- Balancing competing interests.
- Considering long-term impacts on all parties.
- Maintaining strong relationships with both stakeholders and shareholders.
The most successful leaders don’t just focus on shareholders who want profits. They develop ethical, sustainable business models that create value for customers, employees, partners and communities—which ultimately benefits shareholders as well.
Understanding the differences between stakeholders and shareholders provides a foundation for leaders to build businesses that meet a range of needs and deliver shared prosperity.
