What is the difference between a stakeholder and a shareholder?


Quick Answer

Shareholders are individuals who invest in a publicly traded company, while stakeholders have an interest in the company. Stakeholders include employees, business partners and customers. People who are shareholders are stakeholders, but not vice versa.

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What is the difference between a stakeholder and a shareholder?
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Full Answer

Shareholders take interest in the company because they want to see a return on their money. They want the company to spend less and make more money so they realize a bigger return on their investment. In fact, shareholder theory asserts that managers are duty bound to maximize the shareholder’s investment instead of spending money on social issues.

Stakeholders also have a theory about corporations being socially responsible. In essence, stakeholder theory asserts that managers have a duty to balance the financial interests with social obligations. Social obligations include ensuring they do not pollute the air, being charitable and taking care of their employees.

Shareholders may experience some internal conflict because they are both shareholders and stakeholders. Of course, they want to see large returns on their investments, but as consumers, they also think companies must act in the interest of their customers. Often, the internal conflict is easily resolved by making one of the roles a priority. Most people like making money; therefore, they put profits before social responsibility.

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