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Shareholders vs. Stakeholders: A Comparison

By Sthitaprajnya Panigrahi

Often used in business-related discussions, Shareholders and Stakeholders are two major designations in the corporate sector. Although they can sound similar to any layman, there are some major differences between both the terms which make them distinctive and unique from each other. Depending upon the relationship shared with the organization, an employee can either be termed as either one of the above-mentioned designations. According to their stature and positions owned by them in a company, it can be said that ‘a shareholder is definitely a stakeholder in the organization but it is not true vice versa’.

To dissect the jobs and duty of both the positions we have taken a look at every one of them independently.

Shareholders:

Shareholders are the individuals or corporate sectors who own shares in the company and share a financial interest in the profits of the organization. They have right to exercise their opinion and vote to amend the management of the company. Although shareholders are the owners of the company holding some percent of shares, they are not legally responsible for any kind of debts bear by the company. Along with that the money invested by a shareholder can be withdrawn anytime from the organization for the profit or as per the wish and demand of shareholders. As there are no limitations and exceptions, they can also invest their money among the competitive firms belonging to the same sector. However, their position is affected by the performance of the company and either ascends or descends as per the performance of the company in the market. Generally in a business organization, there are two different kinds of shareholders as per their role, i.e. equity shareholders and preference shareholders. Equity Shareholders are considered as ordinary shareholders of the company, who can vote for the company in the Annual General Meeting (AGM), and get repaid at the end of the liquidation time of the company. Preference Shareholders hold more priority than the equity shareholders in receiving the payment at a fixed rate from the company.

Stakeholders:

Stakeholders are either the individuals or institutions who get majorly affected by the outcome of a project. They can either be external or someone from within the organization such as project leaders, managers, team members of the project, consultants of the project, or customers of the project. In this case, the external parties may not belong to the organization but can get affected by the performance of the organization. Tend to hold a long period of relationship with the company; stakeholders get affected during the project and after the completion of the project depending on the success of it. Sharing a mutual beneficiary relationship, both the stakeholders and the company can get affected due to each other’s presentation. In short, stakeholders can get affected by the modification in the objectives and policies of a company.

Conclusion:

Hence it can be concluded that shareholders and stakeholders are quite different terms and holds miscellaneous significance for a company in the market. While shareholders are just legal owners of the organization, stakeholders hold a little bit of more priority than them because of preserving all the factors that can affect the success of a business. Hope this article assists the readers in clarifying some of the doubts related to shareholders and stakeholders.

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