Stakeholder

What Is a Stakeholder?

A stakeholder is anyone who has a stake in how a business operates and performs. This includes people who own part of the company, people who work for it, and people who buy its products or rely on it in other ways. Stakeholders are not limited to those who hold money in the business. A company's decisions about pricing, hiring, plant closures or environmental practices can affect many different groups, and each group may have its own priorities.

Common stakeholders include:

• Shareholders and other owners
• Employees and managers
• Customers
• Suppliers and business partners
• Lenders and other creditors
• Local communities and governments

Stakeholder Theory

Stakeholder theory is a school of thought in business management holding that a company should weigh the interests of all its stakeholders, not only those of its owners. A competing view holds that management's main duty is to maximize returns for shareholders, with other interests protected mainly through laws and contracts. Most real companies balance these views, and the question often arises in discussions of corporate governance, which covers how a company's board and management are held accountable.

Why Stakeholders Matter to Investors

Stakeholder relationships can affect a company's financial results. Labor disputes can halt production, regulatory penalties can be costly, supply disruptions can raise expenses, and damaged reputations can reduce sales. For this reason, some investors study how companies treat their stakeholders, sometimes through ESG investing, which considers environmental, social and governance factors alongside traditional financial information.

Companies often describe their stakeholder relationships in their annual report or in separate sustainability reports. These documents can help investors understand which groups a company considers important, though the information is typically prepared by the company itself and may not be independently verified.