What's the Difference Between Shareholders and Stakeholders?

The terms may look alike at first blush, but they’re far from interchangeable: A shareholder is a person (or business or other type of institution) that owns part of a company by owning at least one share of stock. Shareholders aren’t responsible for actively running the company, and they’re not liable if the business tanks, but they can profit if the company does well—either by selling their stock or by receiving a shareholder distribution (a.k.a. when the business distributes a portion of its earnings to shareholders).

A stakeholder, by contrast, is any person or group that’s impacted by the company. So while all shareholders are automatically stakeholders, not all stakeholders are automatically shareholders—sort of like a square is always a rectangle, but not vice versa. Still confused? Think of it this way: Stakeholder is an umbrella term that includes people who own stock (shareholders!), as well as employees, suppliers, customers, community members, and even trade associations. All of those people and groups are impacted if the company expands or relocates or doubles its business, so they’re all considered stakeholders.

So, which group do execs focus on more? Typically, shareholders. But there’s been some debate over the past decade that execs should consider input from all stakeholders—not just shareholders—when making decisions.