For every company we have individuals, investors, employees, business associates, suppliers and customers that have some association or interest in a company.
Some of them can be shareholders, while others may not. Today, we often here the term stakeholder, more than a shareholder.
Understanding the difference between stakeholder and shareholder
A shareholder is always a stakeholder, while a stakeholder, may or may not be shareholder. Let us see who a stakeholder could mean:
Employees are certainly stakeholders, because their efforts help the business run. They may hold shares in the company, through direct purchases or through employee stock options.
This means they automatically become shareholders and stakeholders in the company. While, they may not be the former, they are most certainly the latter.
Suppliers too are stakeholders, because of the service they provide a company. Should supplies be disrupted it could jeopardize the prospects of the company. Like employees they may or may not be shareholders of a given company.
3) Bond holders
These are certainly one of the biggest stakeholders in a company. This is because, they run the risk of defaults in timely payment of interest and principal amount on their bonds. They again can hold shares and bonds, thus also making themselves shareholders and stakeholders at the same time.
They will be closely associated with the performance of a company, just like shareholders.
Customers are also stakeholders in the company. Like most other categories, they could also be shareholders.
Shareholders and stakeholders, a big difference
In any large company, the stakeholders would be far more large, than shareholders. It is the duty of every company to protect stakeholders and shareholders interest. This would mean it should protect the interest of employees, consumers, suppliers, bond holders, banks etc., which have some or the other direct or indirect interest in the company.
Meeting stakeholder requirements would largely mean meeting many social obligations, including quality, employee benefits, environment and best manufacturing practices etc.
The term stakeholder is very broad based as compared to a shareholder and includes many individuals and entities.