Shareholder vs Stakeholder

(Piper_Wilson) #1

This may sound like an easy one, but I’m betting there are nuances out there. What’s the difference between a shareholder and a stakeholder? Are the terms fairly interchangeable?

(Robert McIntosh) #2

Technically they are completely different - but that depends on how you use them.

The point of ‘shareholder’ is that they have a ‘share’ - i.e. have a very specific, legal, fractional ownership of a (probably) commercial entity

‘Stakeholder’ is a much looser term to cover anyone that has a ‘stake’ in the success of a project, idea or business, but there is no (necessary) legal recognition of that role.

I believe the latter term came to be adopted to move away from the idea that ONLY shareholder benefit should drive decision-making in organisations, and that other groups both inside and outside an organisation would be interested in the outcome, so their views should be taken into account as well - even if in financial terms you need to ultimately keep the shareholders happy - but that is another whole discussion concerning the possible role of Public Benefit Corporations :wink:

While all shareholders are stakeholders in a business, not all stakeholders will be shareholders.

(Nick Emmett) #3

Great summary @thirstforwine !

(Piper_Wilson) #4

Thank you @thirstforwine. That’s perfect.

Does a stakeholder inherently have some sort of authority?

(Sarah Hawk) #5

I’d say yes – over the project.

(Piper_Wilson) #6

I may be wandering off into a whole different topic… I’m picturing a situation where there are different stakeholders in a community but the stakeholders don’t agree on the next steps. What happens then?

Several years back I was a receptionist for an office. The owner of the business told me that all six people who I was fielding calls for were my supervisors. The situation didn’t work very well when two of my supervisors didn’t agree.

(Sarah Hawk) #7

When we work with clients we present the strategy to stakeholders and get their agreement at that point.
In some cases they are asked to sign something, but not always.

(remah) #8

There’s a few issues to be aware with the term stakeholder, as has been said already:

If you are not aware of the more precise meanings then they can trip you up.

Know the legal terms

Shareholder and stakeholder are both legal terms which is where they carry the most weight, in law.

The legal and common meanings are shared for shareholder but not for stakeholder. So you should clarify which meaning is being used if there is a discussion of legal issues, for example, property rights, as a stakeholder is:

  • in law, the person who temporarily holds the stake until ownership is decided. Such stakeholders include trustees, escrow agents, and the courts themselves.
  • in management theory, the more widely used meaning, a person who has an interest in any enterprise (project, undertaking, business, organisation, etc.)

Know the stake at hazard

The most common definitions of a stakeholder do not rely on the success of an enterprise. Rather it is having something to hazard or lose, the stake, that is the basis for applying the term.

Any impact, whether positive or negative, can create the stakeholders interest or stake. That is why business competitors are almost always stakeholders. This creates unusual situations where competitors may have to act against their own interest to further their own interest.

A good example, is when Microsoft propped up Apple in the 1990s when Apple was close to failing as a business. If Apple had disappeared as competitor then the US government could have enforced anti-competitive statutes to break-up Microsoft to reduce Microsoft’s monopolies. There’s a lot of different stories abour this and many different perspectives but the important fact is that Microsoft was a major stakeholder in Apple, and vice versa.

Know the type of wager

In other words, you should know the theory implicitly being used and the explicit application.

Having said that there is a common meaning for stakeholder, there is not really. There are numerous definitions of stakeholder which serve the theories or applications that they are used for.

So the concept of stakeholder in a political situation can be quite different and serve different ends than in a business situation. In business, very different definitions can be used.

A good example comes out of the analysis of power relationships. In social responsibility and corporate ethics it is common to include stakeholders that have little or no authority or power whereas in marketing and competitive strategy it is more common to ignore those with no authority or power.

(Robert McIntosh) #9

that ALWAYS happens

Whilst I accept that stakeholder can also have some legal definition, in general terms it is used to mean literally ANYONE who could have an interest in the success, or otherwise, of a project

in 99% of cases, there are no legal issues of ‘authority’ for a stakeholder, but that does not mean that they do not matter.

yes, every person who calls you (and is presumably therefore either involved in running the business, a client or is a customer) is a stakeholder, and they all matter, but you have to decide who matters most when you have a conflict - that is ‘management’

The customer wants a great product (and deal), the client wants a profitable relationship, and the shareholder wants a profitable business (let’s ignore the complication of timeframes). These CAN align, but rarely do.

The job of a business employee is to make sure that all parties (stakeholders) feel that you are looking after their interests, and that, on balance, this has been achieved. However, technically speaking they are at odds. The better the deal you offer to customers, the less profit you make for shareholders and less money you have to pay clients. The more you pay shareholders, the more you have taken from clients and customers.

As with everything, it is all about the balance.

I still would like to know what prompts the question, since ultimately this is a very fundamental question of business motivation

(Piper_Wilson) #10

I don’t have a motivation other than knowing. I’ve moderated for years and I’m interested in doing more. The company I worked for was a benevolent dictatorship. As a result, I think I’m an excellent moderator but I’m way behind the management power curve.

I just don’t have enough context to be certain of what people mean when they say things sometimes.

(Robert McIntosh) #11

Ah, well if it is enlightenment you seek, … I fear I may not be a worthy guide :wink:

Essentially the concepts are different - see my earlier explanation. I hope the context helps you with your internal relationships.

Maybe, take a read through this article about the new thinking that is driving Kickstarter - it might help and inspire you:

(Kathleen Ulrich) #12

Hi, this one is right up my alley. Our association publishes a glossary of terms used when looking at a business. Here is our definition of stakeholder

An internal or external individual or organization with a vested interest in achieving value through a particular outcome

Vague right? until you get into the weeds ( which is what we do! ) - who’s the triggering stakeholder? - who is the participating stakeholder? If you order a pizza you are the triggering stakeholder because you get that pizza, But the restaurant owner, the staff, the menu publishing company could all be considered participating stakeholders. So with your 2 supervisor scenario, figure out which one is the triggering stakeholder. Who is deriving the most value from the work you are doing?

Here’s another story. A colleague was calling me almost daily crying about her job. Her boss harshly critiqued everything she was doing. But my colleague had enough confidence to know she was doing a great job. Her frustration was that she was doing the job she was hired to do and her boss did not understand. Flash forward a couple of weeks and my colleague received a very public compliment from the CEO. He said he and her boss’s boss thought she was doing a fabulous job. Who was the triggering stakeholder in that scenario? There may be a lot of politics involved in this scenario, but when you look at it from triggering stakeholder perspective, the direct boss may want things done the ways she has done them, but the boss’s boss’s wants the skill set my colleagues brings. Knowing this does not help with the immediate situation, but there is a reason for my colleague to continue to do what she was hired for.

Not sure it applies to your situation, but it sounds like you enjoy your work, so I bet you are great at it! I hope you find a way to get to do more of it!

(Piper_Wilson) #13

@remah - Thank you. The more information I have, the better.

@thirstforwine - You make a perfectly fine guide to enlightenment.

@Kathy - Thank you so much. I hope your friend’s boss gets better for her. Tell her to keep her chin up.