Stewardship Theory Analysis

1470 Words6 Pages
This review aims to shed light on how board of directors’ behaviours are explained by stewardship theory. There are several theories explaining operation of board of directors’ and their behaviours: agency theory, stewardship theory, resource dependency theory, behavioural theory, social contract theory and legitimacy theory. This paper explores stewardship theory and resource dependency theory to understand operation of board of directors’ and their behaviour. Stewardship theory exists as alternative to agency theory as it has some limitations. Stewardship theory explains how psychological factors affect top managers to work towards same interests of shareholders and organisation. Furthermore, stewardship behaviour can influence by other situational…show more content…
Moreover, it improves stakeholders’ confidence and this would aid the sustainability of business in the long run (Wan Yosuff and Alhaji 2012). It is possible that not all of the problems and best practices are transferable across different organisations. For clarity, the main texts under scrutiny are first introduced and basic claims about stewardship theory compared with agency theory. Next, it outlines a discussion of strengths and weaknesses of main claims, including a brief count of other published works that appear not to align with them. Finally, conclusions are drawn about the extent to which the reviewed papers shed light on to two review…show more content…
He carried out research on 192 firms in 12 industry groups under different environmental uncertainties. The findings suggest that neither agency nor stewardship models can adequately predict the consequences CEO duality. However, supplementary analysis for different types and levels of environmental uncertainty indicates that duality can have a positive effect on performance under certain industry conditions, and a negative effect under other conditions. For example, duality is advantageous under conditions of resource scarcity or high complexity (Boyd, 1995). In contrast, Muth and Donaldson (1998) found that board independence factor affected shareholder wealth and sales growth negatively. In addition, agency theory did not supported where board independence and external network connections were interacted, while those of stewardship theory were supported. According to Donaldson and Davis 2011, results of an empirical test fail to support agency theory and provide some support for stewardship theory. The empirical evidence suggested that the ROE returns to shareholders are improved by combining, rather than by separating, the role holders of the chair and CEO positions (Donaldson and Davis
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