If you are a project manager or an investor, you must know the difference between shareholder and stakeholder. These terms sound similar, and have quite a bit in common, but they represent two different types of people. In this post we will see what the difference between shareholder and stakeholder is, both in a project and in a company.
Shareholder vs. Stakeholder
In short, the shareholder holds shares while the stakeholder holds a stake. This may seem confusing at first, particularly if English is not your native language.
The Stakeholder
As we know, the stakeholder holds a stake. In other words, she has some stake in something else, generally in a project or in a company. She is someone with her skin in the game. That is what stakeholder is all about.
Having “a stake” in something means that you have some interest in it because you are influenced by the outcomes, you can influence the outcomes, or both. Imagine you are part of the IT department of a large company, and you are creating a new payroll software for the HR department. Clearly, the HR department is a stakeholder for this project: they have something at stake. They are interested, because their workflow will be influenced by the outcome of the project (having the new software).
As we see in this IT-HR example, a stakeholder is not necessarily an individual. It may be a department, another company, or really any type of entity. For example, in a manufacturing company the trade union of workers can be a stakeholder.
Stakeholders have something at stake in a project. Yet, they can also have something at stake in an entire company. That is clearly the case of the trade union of workers, that is influenced by how the company moves in general – every decision the company makes will have some effects on the trade union.
So, really, stakeholder is a term to indicate anyone who has some interest in the outcomes of a project or company. That interest does not have to be positive; it may be negative. This means some stakeholder may not want the project or company to succeed, or they may be completely neutral.
The Shareholder
Shareholders, instead, owns shares. In a corporation, the ownership is divided into shares so that you can effectively own a little piece of the company. As an owner, you have a claim to company’s profit (or more correctly, cash flows), and this claim is proportional to the amount of shares you own.
If you own 100% of the shares, you will own 100% of the company and as such you will be the sole owner: all moneys will be yours! On the other hand, if you own something like 0.001% of the shares, you will own 0.001% of the company, and receive 0.001% of the claims. This may seem like a dismal amount, but the economic value depends on the company valuation: in March 2021, a 0.001% ownership of Apple would be worth north of 2 billion dollars.
You own the shares and can claim at least some of the profits. Clearly, you have some interest in what the company is doing. Hence, all shareholders are stakeholders. This is not true the other way around, because not all stakeholders will own shares. Also in this case, shareholders do not have to be actual people, although they could be: other companies, hedge funds, and even government can own shares.
We can draw one important but often overlooked conclusion: for a shareholder to exist, shares must exist. The company must issue shares, which is something only corporations can do. Corporations does not have to be necessarily large, but it is important that they are legally a corporation – and not another type of legal entity such as a partnership or sole proprietorships. In that case, you will not have shareholders, but you will have partners or the proprietorship owner – they are still stakeholder but not shareholders. Since shareholder is tied to shares, and we can call shares stocks as well, stockholder is a synonym of shareholder.
From this conclusion, we see that it is impossible to have a shareholder in a project. That is because the project does not issue shares! Of course, you may have a shareholder in the company that is undertaking the project, and he may be very interest in that specific project.
The Shareholder-Stakeholder Difference
In the previous two sections, we saw the difference between shareholder and stakeholder by diving deeper into the role of each. To summarize this difference, we can use the following statement.
The difference between shareholder and stakeholder is that a shareholder owns shares in a company, while a stakeholder is anyone who can be influenced by the company’s operations, or by the outcome of a specific project.
To expand a little bit on this statement, we can draw the following table with the key differences between shareholder and stakeholder.
| Shareholder | Stakeholder |
|---|---|
| Interested in the outcome because he owns shares in the company. | Interest in the outcome even if he does not own shares in the company. |
| Since he has some interest, he is always a stakeholder as well. | Not all stakeholders are also shareholders. |
| Exist only for corporations. | Any type of company, project, or endeavor has stakeholders. |
Shareholder-Stakeholder in Summary
If you work in a corporation, it is crucial that you know the difference between shareholder and stakeholder. This post took care of that, and now you should be all set to climb one more step in the corporate ladder.
Where do we go next? That depends on what you are interested about. If you came here to understand the shareholder-stakeholder difference from the investment world, you may want to dive back in by reading something on Investopedia. On the other hand, if you came here because you are a project manager you may want to deepen your knowledge by honing your referent power or by understanding the phases of a project according to PMBOK. In any case, never stop learning!
