What
is the difference between shareholder and stakeholder?
What's
the role of the shareholder in a company?
What's
the liability of the shareholders in a company?
What
are the major differences between shareholders & stakeholders?
What
is Corporate Social Responsibility (CSR)?
1.
Overview
When you think of
investing in a company you must have heard similar-sounding names, shareholders, and stakeholders. Although their names sound similar, they have quite a
different role in the company.
All shareholders are
stakeholders but all stakeholders are not shareholders. Shareholders hold
interest in the company by virtue of holding shares. It means that they own a certain portion of the company. But stakeholders hold interest in the company
for reasons other than holding shares or ownership.
2.
What's the role of the shareholder in a company?
When you own a single
share in a company, you are a shareholder of the company. You have the
following rights/benefits as a shareholder of a company:
a)
Participate in the profitability of
the company
b)
Hold the shares for capital
appreciation
c)
Participate and vote in the annual general
meeting of the company
d)
Participate in decisions affecting the
rights and interests of shareholders
e)
Participate and vote in the management
of the company
3.
What's the liability of the shareholders in a company?
Unlike in partnership
and sole proprietorship firms, the shareholders are the owner of the company
but they are not liable for the debts of the company. However, they are liable
to the company only when they have not paid the call amount and their liability
is limited to the amount the difference between the nominal value of the share
and the amount actually paid on that share.
For example, if the
nominal value is $1 and the shareholder has paid 60 cents. In this case, the
liability of the shareholder will be 40 cents.
4.
What's the role of the stakeholder in a company?
The stakeholders have
varying roles in the company depending upon in what capacity they have become
the stakeholders. Stakeholders may be shareholders, employees, debenture
holders, bondholders, suppliers, vendors, customers, and government agencies.
Roles of stakeholders
that apply to all of them are:
a)
If the rights and interests of
stakeholders are protected by law then those should be recognized by the
company.
b)
Stakeholders should have effective
redress for the violation of their rights and interest.
c)
Performance-enhancing mechanism should
be developed.
d)
Participation of stakeholders should
be promoted.
e)
Where stakeholders participate in the
major decisions affecting their rights and interest, they should have access to
timely, accurate, and pertinent information.
f)
Their rights and interest should not
be compromised when they raise voices against unethical practices in the company.
g)
Their rights and interest should be
adequately protected by developing a sound insolvency framework.
5.
What are the major differences between shareholders & stakeholders?
The key difference
between shareholders and stakeholders are:
|
Points |
Shareholder |
Stakeholder |
|
Ownership |
Are
owners |
Are
other than owners in many cases |
|
Need |
They
do not have a long term need |
They
have a long term need |
|
Sell/Buy |
They
can sell their shares and buy another company's share |
They
are bound to the company for the long term and they have greater need |
6.
What is Corporate Social Responsibility (CSR)?
The evolution of CSR,
a self-regulating business model, requires companies to be socially accountable
to themselves, their stakeholders, the general public, society, and the environment.
When a company makes the decision to occupy any forest area to build its own factory site, this
decision may increase the profitability of the company in the future. At the same
time, this decision will be responsible for environmental degradation and
pollution which affects the general public and the society at large.
Therefore, the CSR
framework encourages companies to make decisions that protect social
and environmental welfare beyond legal and regulatory requirements.
7. Conclusion
The shareholder
approach sees the firm as existing exclusively for the benefit of its
shareholders and the role of the board and managers is to maximize the
shareholders' value. And the beneficiaries/stakeholders are seen as an end in
themselves and not merely instruments to increase the returns to
shareholders.
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