Agency Theory And Stewardship Theory

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Despite their differences in purpose and productivity, companies run with a similar basic layout called corporate governance. Even within the company, interest can be categorized into two theories: agency theory and stewardship theory.
Agency theory focuses on fixing the misalignment between shareholders and the board of directors in the running of the company. It states that agents will act with a more personalized selfish interest in mind rather than focusing on the interest of the whole, creating a conflict. On the other hand, stewardship theory is a response to agency theory and states that the manager (steward) will act for the interests of the business rather than personal and create a beneficial environment for all. Thus, it displays
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Some benefits of strategic management that can be used to enhance a company are: taking an organization-wide, proactive approach to a changing global world, building an executive team that serves as a model of teamwork, having an intense executive development and strategic orientation process, defining focused, quantifiable outcomes measures of success, making intelligent budgeting decisions, and clarifying your competitive advantage. Furthermore, another benefit of strategic management is that it allows a company to adapt and perform effectively in a changing environment. (Kolb, …show more content…
In essence, it empowered internal controls by re-empowering the board of directors by changing the view from board serving the management to the management serving the board. In other words, that the board feels more like stewards than agents. It also recognizes that independence is necessary for the board to serve as a check on management, established that a code of ethics that needed to be created and followed, created the Public Company Accounting Oversight Board (PCAOB) to inspect auditors, encouraged transparency with rewards, and aided the U.S. Securities and Exchange Commission (SEC) in ensuring that rules are followed or, if they are misused, the management will be held accountable and participation of external auditors and audit commitees will be allowed (Maleske, 2012). After this, business in the United States had a more established and transparent system for managing finances and ethics which the company had to

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