STEWARDSHIP THEORY, STAKEHOLDER THEORY, AND CONVERGENCE

Stewardship Theory, Stakeholder Theory, and Convergence



Stewardship Theory, Stakeholder Theory, and Convergence

Introduction

A number of different theoretical frameworks have evolved to explain and analyze corporate governance. Each of these frameworks approaches corporate governance in a slightly different way, using different terminology, and views corporate governance from a different perspective, arising from a different discipline (e.g., the agency theory paradigm arises from the field of finance and economics). Other frameworks, such as stakeholder theory, arise from a more social-orientated perspective on corporate governance.

Stewardship Theory

Stewardship Theory of corporate governance comprises of the management concepts such as: Takes a positive view of managers, considering them as stewards whose interests are aligned with that of the owners. Managers identity with their organization and derive satisfaction from behaviors that support the organizational interests rather than their own. In contrast to agency theory, proposes corporate governance mechanisms that support and empower managers behaviors. Stewardship theory argues shareholder interests are maximised by shared incumbency of these roles.

Stewardship theory is a theory that managers, left on their own, will indeed act as responsible stewards of the assets they control. This theory is an alternative view of agency theory, in which managers are assumed to act in their own self interests at the expense of shareholders. In American politics, the Stewardship theory is where president practices a governing style based on belief they have the duty to do whatever is necessary in national interest, unless prohibited by the U.S. Constitution.

Stakeholder Theory

Stakeholder theory goes back to its roots in the early 30s of the twentieth century, the flowering times of large corporations and a significant increase in strength of public opinion. At this time of rising public expectations in respect of undertakings were made basic assumptions of the theory known as the theory of stakeholders. According to this theory, the company should operate primarily for the public good and private interests should it descend into the background. If a company wants to survive in the market, its managers must be mediators, linking the world with the world organization to its environment. But the first person who presented this theory in the aspect of management is RE Freeman, who in his book "Strategic Management. A Stakeholder Approach "described the stakeholders as a group while acting on the company and the group to which the company interacts. He argues that stakeholders can have a significant impact on the realization ...