Shareholder Vs Stakeholder: If you don’t know the difference between a shareholder and a stakeholder, you might use it interchangeably, however, there are a few differences that make the two parallel to each other.
Shareholders are the investors of a public company, who buy a portion of the business in exchange for capital appreciation, return on investment, and part-owner of the company.
A stakeholder is part owner of the company in which he or she has a vested interest. The performance of the company is of greater interest to them than capital appreciation. Let’s keep reading this article on Shareholder vs Stakeholder to learn more.
Role Of a Shareholder
A shareholder can be anyone who has invested in the company’s public shares – Retail investors, institutional investors, banks, AMCs, etc. in hopes of making a return on their investment, capital appreciation of shares, and receiving dividends.
Additionally, shareholders also enjoy voting rights for essential decisions that must be approved before being enacted by the board of the company. Shareholders are not liable for a company’s debts, even though they are owners of the firm.
Shareholders can be
- Retail Investors
- Institutional Investors
- High Net Worth Individuals
- Investment Banks
- Promoters of the company
Role Of A Stakeholder
Stakeholders are individuals who have a vested interest in the performance and growth of a firm, beyond return on investment and capital appreciation. Shareholders are always stakeholders in a corporation, but all stakeholders are not necessarily shareholders.
For instance, employees of a company could be stakeholders in their own company, but not necessarily shareholders in other companies.
Stakeholders can be
- Owners and Partners
- Employees of the firm
- Bondholders of the company’s debt
- Vendors and suppliers who work closely with the firm.
Understanding the Difference Between Shareholders and Stakeholders
Let’s compare shareholder vs stakeholder below to see how they differ from one another.
1. Commitments
- A shareholder can buy and sell shares of a company at any given time. They have no long-term obligations with a particular company or company.
- Stakeholders are bound to the company and directly rely on its performance and financial growth.
2. Ownership
- Shareholders are stakeholders in a company whereas stakeholders are not necessarily shareholders in the company.
3. Monetary Benefit
- Stakeholders may or may not receive monetary compensation.
- Shareholders always receive monetary benefits as long as the company is making profits and/or issuing dividends.
4. Types
- Shareholders are of two types – Equity shareholders and Preferential shareholders.
- Stakeholders could be employees, founders, owners, creditors, suppliers, and vendors.
5. Stock Price Valuation
- Shareholders are more focused on the price changes in the company stock and its overall valuation. As they own a portion of the business, they are dependent on the company’s operations and profitability. This in turn drives up the stock price as well as dividends.
- Stakeholders are focused on the financial stability of the company so that the firm continues to be in business, which is directly or indirectly related to their vested interests.
6. Short Term Interest Vs Long Term Interest
- A shareholder’s interest in the company exists as long as they hold the shares of that company.
- Stakeholders, on the other hand, have a concern about the company irrespective of owning shares or not. This could be because their livelihood and income may directly or indirectly depend on the company.
- Stakeholders’ interests are more complex than just selling company shares, as they cannot cut ties by simply sharing their holdings.
In Closing
We hope this article helped you better understand the difference between a shareholder vs stakeholder. Found this article interesting? You can check out the Courses Section to get yourself equipped with the knowledge to get you started in stock market investing today. Happy Investing!
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