Difference Between Stockholders and Stakeholders (With Table)

The terms Stockholders and Stakeholders are often used as synonyms of each other. During an informal conversation, they are sometimes used interchangeably. However, in the business world, these two terms have their very own meaning, and, they differ from each other. They have some common features since they deal in companies or organizations as individuals, groups, or employees. However, they differ from each other in many ways. It might be their power, position, or work.

Hence to know them separately, we need to focus on their work and jot down their differences. This in turn will portray a clear idea about these terms and help us with our confusion.

Stockholders vs Stakeholders

The main difference between Stockholders and Stakeholders is that all Stockholders are Stakeholders, but all Stakeholders are not Stockholders. The difference lies in terms of business. Stakeholders comparatively hold a longer relationship with the organization. Stakeholders have the power to affect the organization that depends upon the percentage of stocks they own.

Stockholders are either a group of people or institution or individuals who invests in a certain company and owns shares or owns stocks of that particular company. They are also known as shareholders. They own a percentage of stock in their company or organization. They are categorized based on shares they own.

Stakeholders are either a group of people or institutions or individuals who have interests bounded with certain companies or organizations. They can affect their company by their legal policies, actions, or priorities. On the other hand, they can also get affected by the above-mentioned circumstances.

Comparison Table Between Stockholders and Stakeholders

Parameters of DifferencesStockholdersStakeholders
Economic StatusThey invest in a certain company and owns shares or owns stocks of that particular company.They have interests bounded with certain companies or organizations.
CategoriesThey are categorized on the basis of shares they own. Some of them are – Ordinary Stockholders, Preferential Stockholders, voting Stockholders, etc.They are categorized on the basis of their king of interest in their company. For example, Primary vs Secondary, Internal vs External, Legitimate vs illegitimate, etc.
PowerIt possesses the power to exert a controlling interest on a particular company or organization.It possesses the power to exert an influence on the company or organization but does not have the power to control it.
Economic BenefitsThey receive dividend payments and increased capital as well in their stock value.Their benefits vary according to the kind of relationship they share with the company.
 ScopeThey have an option to sell their stock and transfer their controlling interest easily.They hold a comparatively longer relationship with the company.

What are Stockholders?

Despite enjoying different kinds of power, the position of a strong stockholder has certain cons. If the stock price of the company they invested in, suddenly drops, the stockholder has to bear the losses. There is no other alternative. Thus, in a way, it is a risk. In many cases, stockholders themselves are the owner of the company. They acquire the accomplishment of the company in the form of increased stock value.

However, other corporate shareholders have different authorities. They are not solely held responsible for any kind of debt of the company and are not bound to manage any financial operations. Stockholders have the privilege to audit the records of the company and can also breach the laws of officers as well as directors. They even have the right to vote on significant matters of the organization. Apart from everything, if a company liquidates its assets, they are bound to receive a guaranteed proportion of share. They can also attend the annual meeting of their company.

Most people prefer to be a common stockholder. It is cheap and profitable as compared to preferred stakeholders. It is flexible and comes with easy terms. One of the main advantages is that common stakeholders have the privilege to vote on important matters of the company.

Being a preferred stakeholder might be a bit challenging and is not as flexible as common stakeholders. However, they do come with several pros. They have their fixed dividend which is much larger than that of common stakeholders. They also get paid before them. Preferred stakeholders generally aim for annual investment income. However, they do not possess any voting right in their company matters.

What are Stakeholders?

Stakeholders may be of senior levels or junior levels. They might be internal or external. They do have the power to affect the organization but on the other hand, also get affected by the organization. They do not have the power to negotiate with their organization directly on any terms. It is to be noted that they are crucial to the success of their project.

For a company to be successful, the support of its stakeholders is very important. However, they do not hold any kind of financial interest in the outcome of the company. On the other hand, they do have a direct interest in the case of health care services and decisions. There is a process of stakeholder analysis. Here, the stakeholders are ranked according to their demand and influence on the company. This, in turn, helps in making vital and effective business decisions for the organization.

Stakeholders are either internal or external. Both of them have an equally important role in the business. Internal stockholders comprise employees, investors, donors, and managers. They have a direct interest in the success of the company and due to this reason are often referred to as Primary Stakeholders.

External stakeholders however do not have any direct attachment. They are affected indirectly by the decisions or outcomes of the company. They include customers, creditors, community groups, and suppliers. They are mainly representational rather than direct and therefore referred to as the Secondary Stakeholders.

Main Differences Between Stockholders and Stakeholders

  1. The basic difference between Stockholders and Stakeholders is that all Stakeholders are not Stockholders. The difference lies in terms of business. Stakeholders comparatively hold a longer relationship with the organization. Stakeholders have the power to affect the organization that depends upon the percentage of stocks they own.
  2. Stockholders are divided into common stockholders and preferred stockholders. Stakeholders are divided into internal stakeholders and external stakeholders. Both of them have equal importance in the company.
  3. Stockholders have the power to exert controlling interest in the company they are working in. Stakeholders do not have the power to control it but can exert an influence on the company.
  4. Speaking of opportunities, Stockholders can sell their stocks very easily and henceforth transfer their controlling interest. Stakeholders generally put up a long relationship with the company.
  5. Last but not the least, economic benefits. Stakeholders receive guaranteed dividend payments as well as increased capital. Stakeholders receive benefits depending upon the kind of relationship they have with the company.

Conclusion

In any business, all Stockholders are Stakeholders, but all Stakeholders are not Stockholders. When an individual or an institution or a group purchases a share in a company, they become the stockholder of that particular business. This leads to the binding of their interests with business action. Thus they are considered as the most important stakeholder of the company. Apart from them, other people or groups are possessing an interest in that business who might not be controlling the interest like stockholders. They are linked to the business in other forms.

Their name is quite similar to each other and so is heir function in many ways. This might lead to confusion among many people. While generally speaking, people end to overlook the minute differences and end up using the wrong term. Hence it is important to know who is a stakeholder and who is a stockholder. They differ unique in terms of power, position, benefits, work, and status.

References

  1. https://link.springer.com/article/10.1023/A:1014061326967
  2. https://link.springer.com/article/10.5840/pom20097318
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