What is Stewardship Theory?


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STEWARDSHIP THEORY.

Ans.    Unlike most theories of corporate governance which begins with the revise that individuals work for self interest the stewardship theory rejects the notion of self interest. It presumes that managers are good steward of corporation and work diligently to achieve higher levels of profits and better shareholder returns. It holds that managers are motivated by achievement and responsibility needs and are self directed, besides attaching significances to their personal reputation. Thus, managers are stewards whose motives are aligned with the objectives of the principal.

            The theory holds that managers inherently seek to do job, maximise company profits and enhance the return to shareholders. This, they do, not for their own good but out of a strong feelings of duty to the firm.

Here the managers do not holds themselves as isolated individuals but consider themselves as a part of the company. They merge their ego and sense of work with the reputation image of the firm. For this to occur, the managers needs to given need clear cut details of their roles and expectations. The organizational structure should provide adequate authority and power to the management. The expectations should be such that it evokes in managers in sense of ability and worth. This will make them company man .i.e. people who will put the company ahead of their own interests.

Thus in stewardship theory managers seek other than financial ends like sense of worth, feeling of job well done where as in agency theory, managers are seen as individuals who pursue their own interest an reputation at the cost of their shareholders.

To conclude, stewardship theory focuses not only motivation of CEO alone but rather in providing structure that facilitates and empowers them. For this there should be fusion of CEO and chair of board to maximize the return to shareholders. However, the underlying belief of the theory that managers are selfless may be culturally contingent. The stewardship theory is similar to the trusteeship principle propounded by Mahatma Gandhi which also states that businessman should be aware of their roles and responsibility vis-a-vis their employees, shareholders, creditors, society, etc.


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