Definition of Stakeholder
What is a stakeholder? In business, a stakeholder is any individual, group or organisation that is influenced by (or influences) an organisation’s actions. They have an interest in the organisation and its performance. They can be within or outside the organisation.
What is a stake?
A stake can be defined as an interest, right or legal claim to a business or its activities.
Internal and External Stakeholders
There are two types of stakeholders: internal and external.
Internal Stakeholders
Internal stakeholders are individuals and groups who are directly or financially involved in the operations of a business. They have the greatest interest because its success or failure has a direct influence on their financial or professional well-being.
Examples of internal stakeholders in business are board members, shareholders, employees, and managers.
External Stakeholders
External stakeholders are individuals and groups who are affected by the work of an organization, but do not have a direct relationship with it.
Examples of external stakeholders are customers, communities that businesses operate in, suppliers, and society in general. The government is also an external stakeholder.
As good corporate citizens, companies need to be sensitive to the needs of their external stakeholders. They should keep them informed of important decisions and give them chances to voice their opinions on matters that are important to them.
You can read more on the different types of stakeholders on this link: 6 Examples of Stakeholders and Their Importance in Business
Not All Stakeholders are Shareholders
You might have guessed by now that ‘stakeholder’ is a much broader category than ‘shareholder’.
Shareholders own shares in companies and benefit financially from the success of those businesses. Because of this direct involvement, we classify them as internal stakeholders.
Although a shareholder is also a stakeholder, not all stakeholders are shareholders.
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Other Articles Related to This
To read the other articles related to stakeholders and social responsibility, you can click on the following links:
- 6 Examples of Stakeholders and Their Importance in Business
- Name 5 Components of Corporate Social Responsibility (CSR)
- What is the Triple Bottom Line in CSR? 3Ps Simply Explained
- Benefits of CSR (or CSI) to the Business – Positive Impact
- 10 Disadvantages of CSI to the Business – Negative Impact
References
Cambridge Dictionary. Stakeholder. https://dictionary.cambridge.org/dictionary/english/stakeholder [2020/04/21]
Corporate Finance Institution. What is a Stakeholder?https://corporatefinanceinstitute.com/resources/knowledge/finance/stakeholder/ [2020/04/20]
Lumen Candela. Business Stakeholders. https://courses.lumenlearning.com/boundless-management/chapter/business-stakeholders/ [2020/04/20]
Stakeholder Map. What is a Stake? Meaning of Stake. https://www.stakeholdermap.com/what-is-a-stake.html [2020/04/20]
