CommUNITY: Merging Shareholders + Stakeholders

In today’s day and age, the idea of merging shareholder priorities with stakeholder interests might seem like a bit of an oxymoron - a far-fetched notion where there can be no common ground.

According to the Corporate Finance Institute, there's an essential distinction between the two. "A stakeholder is anyone who has any stake in a business, while a shareholder is someone who owns shares (stock) in a business and thus has an equity interest.”

There are a variety of reasons stakeholders take a vested interest in what impacts their livelihood. Stakeholders hold concern for the long-term viability and success of where their interests lie, whether it be on a project, within a company, or specific to a community. How will the work project affect an employee’s ability to earn an opportunity for professional development and increased income? Will a company honor its investment in employees and commitments with vendors/suppliers/consultants? How are stakeholders impacted by business decisions of a company headquarters or regional office located in their community?   

Looking at the most significant differences between shareholders and stakeholders, it's the company's bottom line and profitability vs. social and environmental interests.

Shareholder priorities are traditionally perceived to be solely about a business’s return on investment and to the primary benefit of its investors. According to H. Jeff Smith, “...the victory of stakeholder theory, which says that a manager must balance the shareholders' financial interests against the interests of other stakeholders such as employees, customers, and the local community, even if it reduces shareholder returns. The stakeholder theory demands that stakeholder interests be considered as an end in themselves.”

But in a time when companies are faced with higher expectations from consumer stakeholders relative to social, economic, and environmental considerations, there is a heightened responsibility for transparency from companies managing shareholder preferences.

The growing adoption of Corporate Social Responsibility (CSR) and Environmental Governance programs over the past decade suggests that merging shareholder priorities with stakeholder interests produces reputational benefits. As noted in The Harvard Business Review article, The Truth About CSR, the main goal of CSR is “to align a company’s social and environmental activities with its business purpose and values.“ This suggests shareholders and stakeholders share some semblance of equal interest in the business. So how can they find common ground?

When first acknowledging that a difference of priorities and interests exists, there begins an opportunity to find commonality in what matters most to shareholders and stakeholders. In the words of Earl W. Spurgin, “Imagine the marketers in the corporation using their talents to make shareholders aware of the impact on stakeholders in a way that effectively appeals to the compassion of shareholders..." This starts with transparency.

Create lines of communication permitting shareholders and stakeholders to work together in revealing preferences and debunking misconceptions about social, environmental, and profitable value.

Invite employees, customers, investors, and community stakeholders to present their hierarchy of needs if you will. Company feedback channels and community surveys help foster transparency in polarizing perspectives.

The data gathered from shareholders and stakeholders presents clarity around shared values. Mutual benefits emerge, and so begins the process of working towards common ground by organizing the benefits into three criteria. Harvard Business Review refers to these as theaters of practice when enumerating the truth about Corporate Social Responsibility: 

●      Focusing on Philanthropy - Where corporate giving supports stakeholder interests by aligning with non-profit organizations that support a corporate mission, vision, and value.

●      Improving Operational Effectiveness - Identifying ways to engage employees and empower community stakeholders to take ownership of programs that bring efficiency to company operations, while also bridging connections to community principles and tenets. 

●      Transforming the Business Model - Implementing a social/environmental initiative with revenue-generating benefits.  

Stakeholders and shareholders can arrive at a common ground through coordinated and interdependent CSR initiatives, fostering collaboration, shared value, and a positive impact on business operations. Both groups can be mutually aligned in a common ground effort to uphold shareholder priorities while balancing stakeholder interests for the benefit of the company’s bottom line and community interest.            

Tasha L. Jones 

NOTE: Opinions expressed are solely my own and do not express the views or opinions of my employer.