Shareholders are free to do whatever they please with their shares of stock — they can sell them and buy stocks from another company, even if it’s a competitor company. In other words, they may be financially invested in the company, but its overall success isn’t always a priority. chief executive officer Stakeholders don’t necessarily have shares in the business but have an interest — a stake — in it. Stakeholders sometimes also have shares in the company, as in the case of employee shareholders. Shareholders own part of the business, determined by the number of shares they own.

A CEO is a stakeholder in the company that employs them, since they are affected by and have an interest in the actions of that company. Many CEOs of public companies are also shareholders, especially if stock options are a part of their compensation package. However, if a CEO does not own stock in the company that employs them, they are not a shareholder. A CEO may be an owner of a private company without being a shareholder (as there are no shares to buy).

• A stockholder who controls more than 50% of the company’s stock is called a majority stockholder while those who hold less than 50% of the stocks are called minority stockholders.
• The organization which does not have the ability to satisfy its stakeholders defeats the purpose of its existence.
• And they don’t have to be within your organization either—for example, an external agency you work with might be a stakeholder on an upcoming event.
• The assistance and support of advisers assist the organization to effectively use its resources and the support which it receives from other sources.
• A recent example of this can be found with Apple stockholders and stakeholders.
• Stakeholders, on the other hand, often have a longer-term interest in a company’s performance, even if they don’t own shares of stock.

A stockholder (also known as a shareholder) is a person, a group of individuals, an institution, or a company that has a share in the company’s stock, a stockholder can hold as little as even one share of the company. The individuals or institution owning a share of the company makes them a stockholder of that company, and they reap the profits and benefits of the company’s success. On the flip side, being a stockholder also comes with risks like being negatively impacted when the company’s stock loses value. Also, the only financial risk that stockholders face is the loss of money they invested in the company because they are not personally accountable for the debts and the responsibilities of the company.

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Despite the common confusion, stakeholders are not the same as shareholders. A stockholder or shareholder is the owner of shares of a corporation’s common or preferred stock. When evaluating the differences between stakeholders and shareholders, one might be tempted to say there’s no right or wrong answer. That’s true in that neither side deserves to be judged solely for its motivations or principles. The measures a company takes must be legal, but the bottom line is increasing share prices (a concept known as shareholder primacy).

For example, shareholders can be stakeholders of your project if the outcome will impact stock prices. Shareholders are primarily interested in a company’s stock-market valuation because if the company’s share price increases, the shareholder’s value increases. Stakeholders are interested in the company’s performance for a wider variety of reasons.

• Whether you’re managing stakeholders or shareholders, ProjectManager has you covered.
• A shareholder is interested in the success of a business because they want the greatest return possible on their investment.
• Instead of backlash or opposition, you have a better chance of obtaining support for your projects this way.
• They can have a deep interest in and feel the effects of company strategy, but they don’t have to own shares to do so.

ProjectManager has project reports for a variety of different project metrics, from variance to task progress. All these reports can be filtered instantly, so you’re always prepared to make that deep dive into the data when it’s requested. Stakeholders and shareholders will love the transparency ProjectManager gives them into the project. Therefore, the best theory for you and your company or project is dependent on what your main interests are. But it’s most likely that you’ll proceed with a hybrid, as both theories serve different aspects of the business.

Shareholder Theory

Those individual or groups who have power over the organization are the controllers. Organization is required to meet a series statutory norms and regulations enforced by the local, state and central government agencies. They are also to meet the requirements of standardization organizations which have issues the licenses for the products of the organization. They are also to comply with the mandates of various accrediting agencies. Advisers do not take decisions but their advices help the management in taking decisions. The advice may be in the form of overall guidelines, position papers, data analysis, sample procedures, and draft standards etc.

Stockholder’s Theory vs. Stakeholder’s Theory

Management has to ensure through agreements that these requirements are fulfilled by the supplier. Organizational customers have a potential capacity to control the organization. When the organization has only a few customers then it becomes easy for the customers to take charge of the organization thus limiting its independence. On the other hand, the organization which is having multiple customers is required to set priorities, balance conflicting demands, and maneuver so as to satisfy major groups of customers.

Types of Stockholder

For example, if a company is involved in business activities that take away the green space within a community, the company must create programs that protect the social welfare of the community and the ecosystem. The company may engage in tree-planting exercises, provide clean drinking water to the community, and offer scholarships to members of the community. These two words sound similar, but they actually represent two very different roles.

The Differences Between Shareholders and Stakeholders

Stakeholders are more concerned with the longevity of their relationship with the organization and a better quality of service. That is, people working on a project or for an organization are likely more interested in salaries and benefits than profits. Stakeholders tend to have a long-term relationship with the organization.

There are several reasons why companies should focus on creating stakeholder value rather than just shareholder value. For a student of Commerce and Management, this article is of considerable significance as it deals with the critical concept of the fundamental differences between stakeholders and shareholders. There are two kinds of shareholders, those who own less than 50% of a company’s stock are known as ‘minority shareholders’, whereas the shareholders who control 50% or more of a company’s stock are called ‘majority shareholders’.

Stakeholders and shareholders may have conflicting interests, but the two sides don’t have to be at odds. Making money for shareholders may be priority number one for most corporations, but stakeholder issues affect that profitability. It’s a business ethics and organizational management theory that maintains that businesses, to be successful, must create value for all of its stakeholders, not just shareholders. Now that you know the difference, how about a bridge that connects the two?