A stakeholder is a term used in the context of financial markets with reference to ownership and control of the companies. Stakeholder in simple words refers to those group of people who have an interest in the well being of the company as their benefit lies with well being of the company. A stakeholder is different from shareholder and is a much broader term and includes shareholders also, in order to get a better idea about this term one should look at some of the important features of stakeholder –
Stakeholder Characteristics
Types of Stakeholders
Stakeholders are of many types such as employees of the company, shareholders, and owners of the company, raw material suppliers of the company, government of the country, creditors of the company while some stakeholders like government, suppliers have limited interest in the company but when it comes to stakeholders like employees, shareholders and owners they have a major interest in the company are most affected by the bad performance of the company. In simple words, although there are many types of stakeholders but the effect of bad performance of the company is different for different stakeholders while government and suppliers are least affected whereas shareholders and employees are most affected by the bad performance of the company.
Greater Interest in Company
Stakeholder has a greater interest in the success of the company as compared to the shareholder who has a limited interest as they are more interested in the stock price rather than performance and long term interest of the company but as far as stakeholders are concerned their outlook is broad and hence their interest is in the performance of the company over a long period of time rather than the performance of the stock price of the company.
No scope of Shifting
In the case of shareholders, they can easily sell their shares in the open market and invest in other company if they do not like the stock of the company but when it comes to stakeholders they do not have this luxury as they have to stick to the company for long term and cannot easily shift their stakes from one company to another. In simple words, shareholders are like friends just as not all friends are by your side and can leave you anytime in the same way shareholders can leave the company anytime while stakeholders are more like family just as a family stick with you in your bad times also in the same way stakeholders stay with the company for a long period of time.
Non-Monetary Aspects
In the case of shareholders, all they care about is the performance of the stock as they stand to benefit when stock price rise but when it comes to stakeholders they do not only care about the monetary aspect rather they care about the overall performance of the company which is how the company treats its employees, customer service of the company, quality of companies product and service, whether the company is doing corporate social responsibility properly or not and so on.
Internal and External
Stakeholders can be internal as well as external while internal stakeholders are those who are within the company or associated with the company and are directly affected by the performance of the company such as employees of the company, owners of the company, and investors of the company while external stakeholders are those which do not have any direct association with the company and hence are least affected by the performance of the company such as the government agencies, creditors of the company and customers of the company.
As one can see from the above features of stakeholder that they are not the same as shareholders rather they are completely different from them and that is the reason why anyone talking about stakeholders should know various features and details about stakeholder as the majority of people consider shareholder and stakeholder as one and the same thing which in reality is not the case.