They can impact a company’s reputation and bottom line through their actions, such as employees quitting or customers choosing to buy or not to buy a company’s products. Additionally, stakeholders can also influence a company through advocacy, by organizing campaigns and protesting. Shareholders provide the funds that allow companies to invest and innovate, while stakeholders have a stake in the company’s long-term performance. Introduced by the economist Milton Friedman in the 1960s, the shareholder theory of capitalism claims that corporations’ primary focus is to create wealth for its shareholders.

• Conversely, external stakeholders may also sometimes have a direct effect on a company without a clear link to it.
• According to Mr. Freeman, companies should not solely prioritize the stockholders but also focus on creating wealth for their stakeholders.
• A stakeholder is someone who can impact or be impacted by a project you’re working on.
• Shareholders focus mainly on the financial return on their investments, whether in the form of dividends or stock appreciation.
• There are several reasons why companies should focus on creating stakeholder value rather than just shareholder value.

In conclusion, both stakeholders and stockholders play important roles in the success of a company. While they have some key differences and different levels of formal power, they both have the ability to influence a company’s operations and decision-making. As a company, it is important to take the interests of both groups into consideration in order to create sustainable value for all parties involved.

Both stockholders and stakeholders are important and play different roles in the workings of the business, both are present in companies and both have different interests and visions. Stockholders are focused on the short-term profit goals of the organization, while stakeholders make the company’s overall success their first priority and think long-term. Moreover, there are two types of stakeholders; they are internal and external stakeholders. They serve and are employed by the business; therefore, the business directly impacts them. Some examples of internal stakeholders include employees, the board of directors, project managers, owners, and investors.

They do not receive the same payment considerations that an employee would have. A stakeholder is a person who has an interest in a corporation or is affected by the actions taking by the corporation. A stakeholder may be an employee, the family of an employee, the vendors who work with the company, its customers, and even the community where the business operates.

Shareholder vs. Stakeholder: What’s the Difference?

In this guide, we’ll uncover those differences and then discuss what can be done to counter negative stakeholder influence on your projects. Since labor costs are unavoidable for most companies, a company may seek to keep these costs under tight control. The most efficient companies successfully manage the interests and expectations of all their stakeholders. It also means that stockholders will likely see the value of their stocks go down. Investors will look at this decision and decide to move away from the company because doing business in an unprofitable area makes no sense at all. Shareholder theory claims corporation managers have a duty to maximize shareholder returns.

Stakeholder capitalism is a system in which corporations are oriented to serve the interests of all of their stakeholders. Each amount paid by the original stockholder is reported as contributed capital within the equity section for stockholders on the balance sheet of the corporation. 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.

Are Shareholders or Stakeholders More Important?

In other words, a stockholder isn’t the only party having a stake in the corporation. Bankrate follows a strict
editorial policy, 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. Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first.

The terms stakeholder and shareholder are sometimes incorrectly used interchangeably. Stockholders earn capital depending on the value of the stocks they invest in the market. Owning of stocks by Stockholders may result in them becoming owners of that business. The terms ‘Stockholder’ and ‘Stakeholder’ are both business terms and are commonly used in the business world.

One of the main differences is that stakeholders are not necessarily financially invested in the company, while stockholders are. This means that stakeholders may have more of an emotional investment in the company, while stockholders are more focused on financial returns. While stakeholders and stockholders both play important roles in a company, there are some key differences between the two groups. Stockholders, on the other hand, are individuals or entities that own shares of a company’s stock. They have a financial interest in the company and its success, as the value of their stock is directly tied to the company’s performance. External stakeholders, unlike internal stakeholders, do not have a direct relationship with the company.

Type of Companies

They are both mistaken for each other and are used interchangeably at times. With project management software, you also have a central workspace for updates. Plus, built-in visual timeline tools such as Gantt charts make it easy to get everyone on the same page. You can then create operating cash flow a plan and project roadmap that specifically address various stakeholder requirements. Instead of backlash or opposition, you have a better chance of obtaining support for your projects this way. These two divergent paths are known as the shareholder and stakeholder theories.

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. It’s important to understand the unique requirements of each of your stakeholders. You can use a stakeholder map to better understand their impact and influence on the project. If the company performs well, stockholders profit from it as they receive dividends.

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

The worst thing for either stakeholders or shareholders is to feel out of the loop. ProjectManager keeps stakeholders and shareholders a part of the project and aware of its progress with its real-time dashboard. The dashboard is a bird’s-eye view of the project’s progress represented in easy-to-read charts and graphs. The biggest difference between the two is that shareholders focus on a return of their investment. 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.

Key Terms

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.

And when your team feels heard, they’re more motivated to do their best work and help projects succeed. That means instead of aiming for quick wins, you’re investing in your future. Shareholders are important for your company, but as a project lead or program manager you should really prioritize stakeholder theory. That’s because shareholders are usually most concerned with short-term goals that impact stock prices, rather than the long-term health of your company. If you prioritize short-term wins and revenue gains over everything else, you might sacrifice your company culture, business relationships, and customer satisfaction in the process. According to economist Milton Friedman, this theory states that a company should focus on creating wealth for its stockholders.

Shareholders are legally entitled to certain rights by virtue of owning shares in a company, such as voting rights and dividend payments. On the other hand, stakeholders have no such legal entitlements but still have an interest in the success of the business. A stakeholder is anyone who has an interest in the success or failure of a company.

That means they have a limited liability as far as the obligations of the company are considered. 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. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.

The community in which a company is located is also a key stakeholder group. The company’s operations can have a significant impact on the community, and the community can also have a significant impact on the company. For example, if a company pollutes the local environment, it will negatively affect the community and in turn, the company’s reputation and bottom line.