The terms shareholders and stakeholders may sound similar but have two different meanings. We hope that by the end of this article, you understand what the two terms mean clearer.
Shareholders and Stakeholders:
The Shareholder
A shareholder is someone who holds shares of a company. When speaking of shares we’re referring to a small percentage of a company that an investor buys through stocks. A shareholder, of course, is interested in making the most of his investment. The company’s success is essentially your success as well. Stock prices rise when the company is on a roll and vice versa. The investor, also known as the shareholder, has an opportunity to sell the shares of their stock when the price goes up and make a profit.
A shareholder gains dividends from his investment. Depending on how much of the company he owns, he can vote on the company policies and elect members. Essentially anyone who owns a share of a company can vote. However, your power depends on the number of shares you own, which then dictates how much power your vote carries.
Types of Shareholders
You are either a common or preferred shareholder, depending on the type of stock you hold. Both shares can be purchased using a standard brokerage account, but they have different benefits.
A common shareholder owns common stock, which usually has higher return rates. This is usually a long-term investment. As we spoke about before, they can vote and elect members to the board. Common shareholders are a bit riskier than the preferred ones. If a company liquidates, they claim assets only after bondholders, preferred shareholders, and debtholders have been given their full payments.
A preferred shareholder owns what we call preferred stocks. This type of stock usually brings back low returns in the long term. However, it does provide them with an annual dividend payment. They are not provided with the benefits of voting on policies of the company or electing members. It includes less risk than common shareholders because they can claim their assets before common stake-holders.
The Stakeholder
A stakeholder can influence or is influenced by the project you’re working on. This is usually in reference to project management. To work together on a project effectively, all participants need to collaborate effectively. Another example where stakeholders come in is in connection with shareholders. In some cases, shareholders are the project’s stakeholders if the result impacts stock prices.
Stakeholders range from independent contributors to firm executives. They don’t have to be internal either—for example, an external agency with which you collaborate may be a stakeholder in an upcoming event. Similarly, your consumers might be stakeholders if their choices directly impact your product.
Types of Stakeholders
Internal stakeholders include co-workers and cross-functional partners who have a direct relationship with your firm. They are often, but not always, hired by your organization. Shareholders, for example, are internal stake-holders and they are linked to your firm through the stocks they own. As a result, projects that affect stock prices directly impact them.
External stakeholders don’t have a direct connection to your company, suppliers, or customers. Even if they are not part of your company, your project influences them. For example, increasing the size of a manufacturing project would need extra resources from suppliers.
The Differences
The roles of stake-holders and share-holders are very different. Share-holders are interested in the company because they want to make the most of their investment. On the other hand, stake-holders are more into the notion of finances. Internal stake-holders are aiming for the success of their project for the company to succeed. External stake-holders want to gain from your business as well. That might be receiving a good product, customer service, or participating in a respectful and mutually productive collaboration.
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