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VioletaStoimenova/Getty Images October 07, 2022 Bob Haegele is a contributing writer for Bankrate. Bob writes about topics related to investing and retirement. Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Bankrate logo The Bankrate promise
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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Companies often have various people interested in their success, including shareholders and stakeholders. While these two groups often overlap, they are not the same. The first thing to know is that shareholders are always stakeholders because their success depends on the company’s success. While stakeholders may also succeed due to the company, they aren’t always shareholders because they may not own stock. What is a stakeholder
Stakeholders are people who depend on the company, including investors. But a stakeholder’s relationship with a company can be more complex than that of a shareholder. Stakeholders can be company employees, suppliers, vendors, customers and even the local community. While some stakeholders are mainly concerned with a company’s performance for financial reasons, that isn’t always the case. A company’s customers can be stakeholders, as can government entities, which are supported by the company’s taxes and those of employees. The community or communities in which the company operates can also be stakeholders. For instance, if a company builds a new plant for manufacturing or refining, it might have environmental impacts on the surrounding area. So people who live there are stakeholders because the plant might affect their physical and emotional well-being. What is a shareholder
In contrast, a shareholder is a person or institution . For example, individuals often purchase shares of stock as part of their retirement strategy, hoping to enjoy long-term share appreciation. Institutions might have other motivations for purchasing stock. For instance, comes with voting rights, so institutions may buy this type of stock to gain a controlling interest in a company. Companies may issue another kind of stock called , and owners of this could also rightly be termed shareholders. Key differences between shareholders and stakeholders
Shareholders and stakeholders can often have overlapping priorities, but they aren’t the same. Here are some key differences between them. Company ownership
All shareholders are stakeholders, but not all stakeholders are shareholders. Owning stock in the company makes you a shareholder as well as a stakeholder. But anyone affected by the company could be considered a stakeholder, whether they own the company’s stock or not. Priorities
Shareholders are focused on financial returns, while stakeholders are interested in broader performance success. Common stockholders have voting rights, and can exercise them, notably at shareholder meetings. However, the shareholder’s motivation to vote is often financial. Most shareholders buy stock in a company mainly to generate a financial return. Stakeholders might be financially interested in a company, but not necessarily because they are shareholders. For example, a company’s employees are stakeholders but may or may not own shares of stock. However, their job security depends on the company’s financial success. Stakeholders usually want a company to succeed, but for reasons that can be more complex than its share price. Short-term outlook vs long-term outlook
Shareholders are often more short-term focused than stakeholders. The short-term focus of shareholders is evident when the press reports a negative news story about a company. Negative press often leads to an immediate drop in share price as investors offload shares. However, the news story may not affect the company long term. Stakeholders tend to be more long-term focused. Employees, suppliers, and vendors often look to maintain their relationship with the company for years. Stability is often a plus for stakeholders, who may be less concerned with day-to-day developments. They may be happy as long as they can maintain their existing social or economic agreements with the company. Shareholder theory vs stakeholder theory
The distinctions between groups are brought out in theories on shareholders and stakeholders. Shareholder theory suggests that the sole responsibility of corporations is to maximize profits for shareholders. Stakeholder theory, in contrast, is the idea that stakeholders should have priority and that the relationship between stakeholders and the company is more complex and nuanced. Shareholders often focus on short-term fluctuations in a company’s share price. If a company , shareholders can sell their stock. They can either repurchase the stock later or buy stock in a different company, while no longer being a shareholder in the first company. So they’re able to dissolve their relationship with the company quickly and maybe with little cost. But things may not be so simple for stakeholders. For instance, a supplier might rely on another business to buy its products. If the company buying those products struggles, it may stop placing orders with the supplier. This would likely impact the long-term financial performance of the supplier negatively. But it isn’t ideal for the buyer, whose product lines might suffer, too. So the relationship between companies and stakeholders is often more complicated. In the example, the company might stop placing orders with the supplier due to economic conditions. It hasn’t decided to stop using the supplier, but its revenues are down, so it can’t place orders as it once could. It might resume them in the future, but only after the economy improves. So stakeholders often have a more complex relationship with the company than shareholders. Bottom line
While the key objective differentiator between a shareholder and stakeholder is whether they own stock or not, the two groups can differ in many other respects, particularly their attitudes as well as social and emotional investment in the company. Stakeholders have broader motivations beyond simply the financial success of the business that they’re connected with. SHARE: Bob Haegele is a contributing writer for Bankrate. Bob writes about topics related to investing and retirement. Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Related Articles