Stakeholder

Reviewed by Sujaini | Updated on Aug 26, 2020

What is a Stakeholder?

A stakeholder is a person with interest in a company and that can either influence or be influenced by the business. In a traditional company, the key stakeholders are its creditors, staff, consumers and suppliers. Nevertheless, the new concept theory goes beyond that original notion to include external actors like a society, government, or trade group.

Understanding the Stakeholders

A stakeholder can be internal or external to a business. Internal stakeholders can be people who have a direct relationship with the company, such as through ownership, employment, or investment. Whereas, external stakeholders are those who do not directly hold a relationship with the company, but are affected by the actions and outcomes of the business in some way. Creditors, suppliers, and the public can be considered as external stakeholders.

Examples of Internal and External Stakeholders

Internal Stakeholder Investors are a common type of internal stakeholder and are heavily impacted by a business outcome. For example, if a venture capital firm decides to invest Rs.5 million in a technology startup in exchange for 10% equity and significant control, the firm becomes the startup's internal stakeholder.

The returns on the investment depend on the startup's success, or failure, which means it has a vested interest.

External Stakeholder External stakeholders are a little more difficult to identify since they have no direct relationship with the company. When a company goes beyond the allowable carbon emission cap, the city in which the company is located is deemed an external stakeholder because it is impacted by the increased emissions.

In comparison, external stakeholders may also sometimes have a direct impact on a company, but they are not directly linked to it. Government is also an external stakeholder.