Agency Theory And Stewardship Theory Paper

Agency Theory and Stewardship Theory

Corporate governance is broad term used to refer to the different policies and regulations that a company follows to ensure that the interest of investors, employees, customers and suppliers are maintained. It is meant to ensure there is no corruption, profit loss, and that the company is protected from any legal issues. A company can use one of several governance theories as a model to run successfully. Agency Theory and Stewardship Theory are two of the several theories used by companies. Agency Theory believes that shareholders interest requires separation of CEO and board of directors for a checks and balances effect. Stewardship theory believes that leaders have aligned goals and will work together

The only member that showed up was CEO Robert L. Nardelli who was being questioned from shareholders about his compensation which he refused to answer. In 2006 Robert L. Nardelli was forced to resign as chairman and chief executive due to the anger of shareholders and corporate governance experts pertaining his compensation and the company 's drastically low stock prices. From the time he was with the company he had received up to 240 million in salary while company shares failed to keep up with would soon be The Home Depot’s top competitor, Lowes. He also received a severance payment of 210 million dollars, which created an up roar with the shareholders. They demanded several board of directors be fired after it was discovered that the company along with Nardelli was involved in a stock option backdating scandal. The company goes through many changes after this, including the replacement of executive leaders and company by-laws are created that require that two-thirds of independent board members approve any compensation

“Strategic audit can be used in analyzing complex business issues and for strategic decision-making process” (Wheelen, and Hunger, P7). The audit consists of a list of questions leaders use to analyze the strengths and weaknesses of a company. It uses external diagnostic factors as well as internal diagnostic factors to evaluate the company. Strategic audit helps corporate governance by allowing leaders to ensure that the business is operating in the best interest of the company and shareholders. Identifying the short comings of a company gives them an opportunity to compose a strategy to correct the issues. An example of The Home Depot using a strategic audit is its “voice of associate” survey given every year to associates as well “voice of the customers” survey given to customers. The employee survey consists of question about the overall company as well as the specific location. Customer survey is provided to all customers at the end of their receipts with the chance that a customer will be entered in a raffle to win a five-thousand-dollar gift card. Management is provided with the survey results in order to address issues and overall maintain a successful