Stewardship Theory

The board of directors is the “highest governing authority within the management structure at any publicly traded company” (Kennon, 2008). For this reason, the board is in charge of defining the corporate mission, setting the company’s objectives, constituting sub committees like the remuneration, risk and audit committee and approving the firm’s strategy concerning the allocation of the financial resources (Oss, 2003). Regardless of wielding such authorities, the board cannot manage the day-day operations of the company.

“The board would thus put together a management team to be responsible for this” (Oss, 2003). According to Oss (2003), it is the board’s task to govern and the CEO’s to manage. With respect to all stakeholders, the responsibility

It also focuses on the internal relationship between the different primary stakeholders. But unlike the agency theory which suggests individuals are self-serving, the stewardship theory views managers as “stewards”, who are trustworthy and always giving their best to achieve company and shareholder goals instead of thinking of their own interests (Elgaied and Rachdi, 2008).

According to this theory, the principals and the agents try to create a relationship to achieve the best possible result for the organization. This way, the board would not play a big part in monitoring the managers, but more in guiding and counseling management if needed (Gabrielsson, 2003). Some authors, however, suggest that regardless of the fact that managers are seen as stewards, it is still important to monitor their actions. A board with new points of view and different backgrounds could still make a difference in difficult situations, even if everyone works hand in hand from the start to make the organization

It argues that the survival and performance of a company are linked to its ability to create value and contentment for its stakeholders. The most important groups of stakeholders are stockholders, the employees, customers and communities (Gabrielsson, 2003). In this situation, the task for the board members is to consider the various outside interests in the firm and try to align and satisfy them through their governance policies. The great difficulty here is that certain stakeholder interests are not manageable at the same