Instead of agency theory, stewardship theory offers a different perspective of the relationship between board and management. According to Davis, Schoorman and Donaldson (1997), Stewardship theory has its roots from psychology and sociology and is defined as “executives as stewards are motivated to act in the best interests of their principals”. Managers are viewed as ‘steward’ rather than the entirely self-interested rational economic man of agency theory (Muth and Donaldson,1998). Meanwhile, stewardship theory argues that managers are not motivated by individual goals. In this perspective, they are business steward whose motivations are maximizing the benefits of shareholders. Managers are interested in achieving high performance and capable
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Thus the biggest difference between agency theory and stewardship theory is the approach to motivation. The situational factors in stewardship theory are: trust, engagement, collectivism and low power distance. In contrast, in the agency theory these factors are: control mechanisms, individualism, and high power distance (Beata Glinkowska,2015). According to this theory, the role of the board is not to supervise and control the managers, but to coordinate with managers (Francis, 1997; Wallis, …show more content…
the importance is what is the rule of the two theories. For example, in the case of continuous business, the interests of managers and shareholders of the interests of the target is relatively consistent; and when the status of managers are threatened, such as hostile takeover which may shake their jobs, they began to protect their own personal Interest, agency theory can explain the manager's response to this. One of the principles of switching is whether the manager is safe in the organization (Donalds and Davis, 1991). Hence, in a company when its CEO has high authorization as the steward who is responsive to the future of his company, will be very suitable to take various organizational acts and will also be very determined when facing different opinions from outside
Thus the biggest difference between agency theory and stewardship theory is the approach to motivation. The situational factors in stewardship theory are: trust, engagement, collectivism and low power distance. In contrast, in the agency theory these factors are: control mechanisms, individualism, and high power distance (Beata Glinkowska,2015). According to this theory, the role of the board is not to supervise and control the managers, but to coordinate with managers (Francis, 1997; Wallis, …show more content…
the importance is what is the rule of the two theories. For example, in the case of continuous business, the interests of managers and shareholders of the interests of the target is relatively consistent; and when the status of managers are threatened, such as hostile takeover which may shake their jobs, they began to protect their own personal Interest, agency theory can explain the manager's response to this. One of the principles of switching is whether the manager is safe in the organization (Donalds and Davis, 1991). Hence, in a company when its CEO has high authorization as the steward who is responsive to the future of his company, will be very suitable to take various organizational acts and will also be very determined when facing different opinions from outside