It’s important to know the difference between shareholder and stakeholder. If you’re a shareholder, then your job is to maximize share value. But, if you’re a stakeholder, then your job is to maximize shareholder value.
- Shareholder: An owner of shares in a corporation or financial asset that entitles the shareholder to part ownership and/or profits.
- Stakeholder: Any group or individual who can affect, or perceive themselves to be affect by a decision, activity, or business venture.
For example, The CEO reports directly to shareholders but works with stakeholders including employees and customers when deciding how best for their company’s success and growth.
So if you want to understand how shareholders and stakeholders differ from one another, keep reading!
What is a Shareholder:
A shareholder is an individual or organization that has invested and who owns stock in a corporation or company. This group of investors holds an ownership stake in the business. This entitles them to anything from quarterly dividends to voting rights on major decisions made by management teams.
Shareholders typically have an interest in increasing the price of their shares for personal gain. But they don’t have any say when it comes to what happens with the business as a whole – that falls on the stakeholders’ shoulders.
The shareholder may be an owner, part-owner, shareholder with voting rights (i.e., stockholder), or a shareholder without voting rights (i.e., limited shareholder).
Role of Shareholder:
The shareholder perspective is that the company exists to maximize shareholder returns, and this has become accepted as a common term in business. However, shareholder primacy reflects an economic philosophy where managers are believed to be working for shareholders at all times.
This view focuses solely on short-term financial results rather than the long-term success of the corporation. There are many examples of corporations that have experienced significant increases in revenue. Because they embraced stakeholder management principles over shareholder management principles.
What is a Stakeholder:
Stakeholders are any individuals or organizations who have some sort of vested interest in your company’s success – whether it be financial, reputational, strategic, etc. These groups may include employees (of course), customers, and suppliers but also community members with whom you share common space within their jurisdiction.
Stakeholders’ opinion has an impact on shareholder value. Because they affect the companies reputation which gives them more power over shareholder decisions. This means that shareholder value needs to be balanced with stakeholder valuation.
Role of Stakeholder:
The role of a stakeholder is to generate business benefits for themselves by being part of the shareholder’s strategy process or through collaborating on initiatives. They provide mutual benefit to both shareholders and stakeholders alike. It is important for corporations to keep in mind that shareholder value can’t be created without the support of all stakeholders.
A company with a clear understanding of its purpose and how it benefits society will have a more positive shareholder valuation than one whose only objective is to maximize shareholder return, which leaves many stakeholders out in the cold.
Difference between Shareholder and Stakeholder:
The difference between the two. However, comes down to how these individuals are involve with the day-to-day operations of their investments.
For example, when companies come under pressure from stakeholders for environmental reasons (such as Greenpeace), shareholder value typically suffers because of this shift in focus.
On the other hand, if shareholders push back against moves made by management teams related to corporate social responsibility initiatives (outlined by stakeholder demands) then shareholder value could also suffer at times. In both cases, though shareholder value is getting more favor over stakeholder value.
Responsibilities:
The shareholder is responsible for ensuring the company’s growth and increasing shareholder value.
The stakeholders are accountable to all groups within their circle – shareholders, government entities, employees, customers, investors, etc. They need to ensure that they’re balancing shareholder interests with those of other parties in order to create long-term success for everyone involved.
Shareholders want profits while Stakeholders seek societal good and financial stability. A shareholder seeks increased dividends or share prices whereas stakeholders lookout for tax revenue or opportunities such as job creation and mitigating risk.
Decision-Making Power:
Shareholders have the most power when it comes to decision-making. They can vote out executives or make shareholder resolutions in order to sway management decisions – often in a way that benefits shareholder value at the expense of stakeholder interests.
Stakeholders hold fewer voting rights, but they still have an impact on shareholder decision-making. For example, stakeholders could contact local government officials about environmental issues, and then shareholders force into action if their image can affect by bad press.
Shareholders are interested only in making money while Stakeholders want businesses to contribute positively toward society as a whole. This means that shareholder value has more weight than stakeholder values within organizations because investors typically influence company policies more so than others.
Differing Viewpoints:
Shareholders have an interest in making money while Stakeholders seek societal good and financial stability. A shareholder seeks increased dividends or share prices whereas stakeholders lookout for tax revenue or opportunities such as job creation and mitigating risk.
Business owners with a stake in the company make decisions, not shareholders who want to sell their shares at the right time – according to shareholder value rather than stakeholder requirements.
Conclusion:
As you can see both shareholders and stakeholders have different roles. But work together towards common goals which will help businesses achieve sustainable results in time.
In conclusion, shareholder and stakeholder management should not be thought of as mutually exclusive. Rather they must both exist together for lasting value creation within an organization’s ecosystem to occur.
FAQ’s
Why shareholder and stakeholder value is important:
There are some common misconceptions about shareholder and stakeholder management. The shareholder perspective has been proven to be wrong in many cases. While the stakeholders’ approach takes a long-term view of business success that focuses on benefiting all parties involved.
When it comes down to it. Shareholder and stakeholder value should not be thought of as mutually exclusive. Rather they must both exist together for lasting value creation within an organization’s ecosystem to occur.
Shareholders need strong corporate governance from their boards in order to create sustainable shareholder returns over time. Therefore when you balance with each other there will more chances for greater financial results. Then if only focused on one aspect or another which can lead corporations to fail economically. Because they need to take into account shareholder and stakeholder interests in order to be successful.
What is shareholder value?
Shareholder value can be define as a return on investment. Every shareholder wants their share price to go up. So they’ll get more dividends and/or sell it at a higher price than what they paid for it. But shareholder value doesn’t always mean good business practices – which leads us into stakeholder management.
Why are shareholders important to a company?
Shareholders are a company’s owners and therefore have a right to keep up to date about what is going on. They also have the power to vote for board members at shareholder meetings. So they can influence management decisions if the company doesn’t serve properly. This includes making sure that shareholder value doesn’t affect by other stakeholder requirements such as environmental impact or social responsibility.
What do shareholders want from companies?
In general, shareholders care primarily about stock prices and dividends when it comes to corporate policies because this directly affects shareholder value over time. This means that if a shareholder has invested in a business early on then. They should expect some sort of return based on how much money was initially put into the investment (i.e., share price).
