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

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Offline s.arman

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The words stakeholder and shareholder are often used loosely in business. The two words are commonly thought of as synonyms and are used interchangeably, but there are some key differences between them. These differences reveal how to appropriately manage stakeholders and shareholders in your organization.

For example, a shareholder is always a stakeholder in a corporation, but a stakeholder is not always a shareholder. The distinction lies in their relationship to the corporation and their priorities. Different priorities and levels of authority require different approaches in formality, communication and reporting.

It’s important that these terms are well-defined to avoid confusion. Even if you think you know what they mean, take a moment to refresh yourself.

What Is a Shareholder?
A shareholder is a person or an institution that owns shares or stock in a public or private operation. They are often referred to as members of a corporation, and they have a financial interest in the profitability of the organization or project.

Depending on the applicable laws and rules of the corporation or shareholders’ agreement, shareholders have the right to do the following (and more):

Sell their shares
Vote on those nominated for the board
Nominate directors
Vote on mergers and changes to the corporate charter
Receive dividends
Gain information on publicly traded companies
Sue for a violation of fiduciary duty
Buy new shares
Shareholders have a vested interest in the company or project. That interest is reflected in their desire to see an increase in share price and dividends, if the company is public. If they’re shareholders in a project, then their interests are tied to the project’s success.

The money that is invested in a company by shareholders can be withdrawn for a profit. It can even be invested in other organizations, some of which could be in competition with the other. Therefore, the shareholder is an owner of the company, but not necessarily with the company’s interests first.

What Is a Stakeholder?
We’ve written about what a stakeholder is before, and the definition still stands. A stakeholder can be either an individual, a group or an organization impacted by the outcome of a project. Therefore, they have an interest in the success of a project. They are either from the project group or an outside sponsor.

There are many people who can qualify as a stakeholder, such as:

Senior management
Project leaders
Team members on the project
Customers of the project
Resource managers
Line managers
User group for the project
Subcontractors on the project
Consultant for the project
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.

Stakeholders tend to have a long-term relationship with the organization. It’s not as easy to pull up stakes, so to speak, as it can be for shareholders. However, their relationship to the organization is tied up in ways that make the two reliant on one another. The success of the organization or project is just as critical, if not more so, for the stakeholder over the shareholder. Employees can lose their jobs, while suppliers could lose income.

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