Definition: Shareholder & Stakeholder

Shareholder approach (interchangeable with stockholder):

A shareholder is simply an individual, organization, or company that legally own share(s) of stock in a joint-stock company. By owning shares of stock, a company’s shareholders collectively own the company itself and therefore have the right to vote on decisions that affect how the company is run. This usually means the shareholders as part owners will push for company actions that increase their own financial returns.

Definition: A company that uses the shareholder approach to conducting business typically views the impact of business operations on profit. In addition, the length of concern for changes in business operations is usually short-term; such as focusing on meeting quarterly or annual results.

Attributes:

• Shareholders are primarily concerned with the company’s bottom line.
• In a traditional business models, shareholders have the primary influence on the company’s strategy, usually resulting in business model with the foremost objective to increase the company’s stock value.
• In a shareholder business model, a company only addresses the needs and concerns of four parties: investors, employees, suppliers, and customers; with investors and customers receiving the most attention.

Stakeholder approach:

To make an analogy, stakeholder and shareholders are like sparkling white wine and champagne. All champagne is sparkling white wine, but not all sparkling white wine is champagne. Similarly, all shareholders are stakeholders, but not all stakeholders are shareholders.

A stakeholder is anyone that can be affected by a company’s actions, objectives, and policies. This includes both internal stakeholders, such as employees and managers, and external stakeholders, such as shareholders, suppliers, customers, surrounding communities, creditors, the government, to name a few.

The term’s common use came about only after R. Edward Freeman published his book Strategic Management: A Stakeholder Approach in 1984.

Definition: A company that uses the stakeholder approach to conducting business typically views the impact of business operations on a wide range of issues; including, but not limited to: profit, reputation, employees, supplies, customers, shareholders, the environment, and the communities where the company conducts business. The length of concern for changes in business operations is usually short-term and long-term; such as understanding the need to meet business objectives on a quarterly or annual basis, but also appreciating the need to focus on the impact on the company beyond just an annual time-frame.

Attributes:

• Stakeholder-oriented companies are primarily concerned with a company’s triple bottom line
• Whereas shareholders have a legal right to directly affect a company’s policies and actions, the other groups incorporated stakeholders can influence a company indirectly as many stakeholders have no involvement with the company in any financial or legal way.
  • In other words, not all stakeholders are equal nor entitled to the same considerations.
• In a stakeholder business model, a company can address or be influenced by the needs and concerns all people, groups, and places affected by the company (including the same parties that shareholders affect investors, employees, suppliers, and customers).

As successful companies use sustainability and CSR more in frequently, stakeholder-oriented business models will also become more common.