Shareholders vs. Stakeholders - what's the difference?
A stakeholder is anybody who can affect or is affected by an organisation, strategy or project. They can be internal or external and they can be at senior or junior levels.
A shareholder owns part of a company through stock ownership
Video - The Shareholders vs. Stakeholders Debate
In this video Edward Freeman
discusses the debate that is often framed as 'shareholders versus stakeholders'. He points out that the perceived differences between a Shareholder view of the firm and a Stakeholder view are not as large as often perceived. That is because Stakeholder Theory is a theory about business
, because community and civil society is central to business.
Transcript of video - shareholders versus stakeholders
In lots of places we see this debate as between Milton Friedman
who is seen as the advocate of maximizing projects for shareholders and stakeholder theorists are seen as taking care of stakeholders.
And so this Friedman - sometimes it me – vs Freeman debate gets posed in all the business ethics textbooks and classrooms etc.
I actually think if Milton Friedman were alive today I think he would be a stakeholder theorist
. I think he would understand that the only way to create value for shareholders in today’s world is to pay attention to customers, suppliers, employees, communities and shareholders at the same time.
What Friedman was against was the idea of ‘social responsibility doesn’t have anything to do with business’. I am against that too - I think stakeholder theory is a theory about business, but community and civil society is absolutely central to business. We need Corporate Stakeholder Responsibility. If we have that there is no conflict between shareholders and stakeholders.
References and further reading
Shareholders vs. Stakeholders -- Friedman vs. Freeman Debate - R. Edward Freeman, Youtube video https://youtu.be/_sNKIEzYM7M.
Business Roundtable Institute for Corporate Ethics corporateethics Youtube channel
Business Roundtable Institute for Corporate Ethics
MacEachern, A., 2016. What is the difference between a shareholder and a stakeholder? Investopedia LLC, 2016, Available at: http://www.investopedia.com/ask/answers/08/difference-between-a-shareholder-and-a-stakeholder.asp [Accessed 04 February 2016].