Corporations and investors use a lot of terms, but none can be more confusing than the term stakeholder.
A stakeholder is someone who has a “stake” in a company’s success – someone who can be affected by or influence the company’s operations. They can be business owners, shareholders, employees, bondholders of company-issued debt (creditors), customers who rely on the company’s success, or even product suppliers or vendors who rely on the company’s success for their own revenue or profit.
Types of Stakeholders
Internal and external stakeholders are the two main types of stakeholders.
Internal stakeholders are those who have a direct impact on the business’s operations and are affected directly by its successes or failures. External stakeholders are those who are impacted by the business but are not involved in its operations.
Read everything about the different types of stakeholders
For example, in a Chapter 11 bankruptcy, a company declares voluntary Chapter 11 bankruptcy in order to reorganize itself in the hopes of making changes that will improve its future prospects, such as changing its strategy or seeking funds from external stakeholders to continue to pay its debts. In many cases, the company’s owners, employees, and shareholders stay put, doing what they’ve always done, in the hopes that the business will recover in some form, even under new ownership.
A stakeholder does not have to be a shareholder to be considered a stakeholder. A shareholder, on the other hand, is a primary stakeholder, because shareholders, at least in the stock market, benefit from a company’s success while also being affected by its failures.
Shareholders choose whether to increase their investment in a company by purchasing more stock or to sell some of their stock to diversify their portfolio. During earnings season, one obvious impact of the company’s success or failure on shareholders can be seen.
Internal stakeholders, on the other hand, are entitled to vote in the election of directors of a public company and to have a say in any strategic decisions made by the company. A ‘controlling shareholder’ also has the power to nominate its own candidates for the company’s board of directors, as well as to influence strategy decisions and ideas, such as looking for suitors to buy or targets to acquire in order to grow or change direction. Shareholders are the most important stakeholders in a public company because they own shares and thus have a stake in the company’s ownership.
How money is affecting the projects?
Banks sometimes be a stakeholder due to the big amount of money they have to fund the project and most of economies depends on the available funds of the banks. Read more about how much money is there in the world and how the global money is affecting the projects.
Why Do You Need to Worry About Stakeholders in Business?
A company must keep innovating, trying new things, developing new projects, and attracting stakeholders, including customers, in order to grow. The first step after having an idea for a project – whether a new product, a new patent, or a new operating method – is determining who the project’s stakeholders are, understanding the role of different stakeholders in the project, such as internal versus external, and identifying project-related goals and expectations.