Stakeholder definition
/What is a Stakeholder?
A stakeholder is any person or entity that has an interest in a business or project. Stakeholders can have a significant impact on decisions regarding the operations and finances of an organization. Examples of stakeholders are investors, creditors, employees, and even the local community. We list the various categories of stakeholder in the sections below. In short, stakeholders can comprise a substantially larger pool of entities than the more traditional group of shareholders who actually own a business.
Shareholders as Stakeholders
Shareholders are a subset of the stakeholder category, since shareholders have invested funds in the business, and so are automatically stakeholders. However, employees and the local community have not invested in the business, so they are stakeholders but not shareholders. Shareholders are the most likely to lose all of their money in the event of a business shutdown, since they are last in priority to be paid from any remaining funds.
Creditors as Stakeholders
Creditors lend money to the company, and may or may not have a secured interest in the company's assets, under which they can be paid back from the sale of those assets. Creditors are ranked in front of stockholders to paid in the event of a business shutdown. Creditors include suppliers, bond holders, and banks.
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Employees as Stakeholders
Employees are stakeholders, because their continued employment is tied to the continued success of the company. If it fails, they may at most be paid severance, but will lose all other continuing income streams from the company.
Suppliers as Stakeholders
Suppliers are stakeholders, because a potentially substantial proportion of their revenues may come from the company. If the company were to alter its purchasing practices, the impact on suppliers could be severe.
Local Community as Stakeholders
The local community is the most indirect set of stakeholders; it stands to lose the company's business if it fails, as well as the business of any employees who would lose their jobs as a result of the business closure. A community might also be harmed through the actions of a business, if it causes environmental damage or excessively imposes on the level of public services being provided by the community.
Governments as Stakeholders
The government is an indirect stakeholder, since it relies on the business for tax revenue, and may need to act if the business breaches any government regulations that apply to it. Governments are more likely to become involved when a business could potentially endanger the public or cause environmental damage.