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 for the best interest of shareholders.
Board of Directors
An example of a company with strong corporate governance is The Home Depot.
The Home Depot is an example of a company that uses their leaders to enforce corporate governance with rules and regulations called "standard of performance" are put forth for employees as well as for leaders themselves. They have a board of directors that is "dedicated to continuing the company 's leadership position in matters of corporate governance and to maintaining an active role in the business"(Homedepot.com, 2016). Board of directors are a group of people that are chosen to oversee a company and make decisions based on its best interest. They are responsible for making major company decisions, policies, and are the representatives of their stockholders. Based on the company, members of the board are either appointed or elected. The Home Depot holds elections every year in an annual meeting of shareholders. The nominating and corporate governance ...
... middle of paper ...
...gnostic 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 comp
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- This essay seeks to contrast the difference between agency theory and stewardship theory in a corporate governance. Agency theory is defined as the relationship between shareholders and managers where the manager is expected to represent the shareholders’ best interest without regard for self-interest (John, Makhija, Ferris, 2014). An example of this would be a home owner who advertised property for rent. In this situation the shareholder would be the property owner. The property owner then hired a property management company.... [tags: Management, Corporate governance]
969 words (2.8 pages)
- Transformationally Adapting Servant Leadership: A Leadership Theory Application Mitten Guardianship Agency (MGA) is a nonprofit organization that supports their community by providing guardianship, conservatorship, payee, and special needs trust services. MGA’s goal is to assist those who are unable to care for themselves while simultaneously preserving their independence and dignity. My role in the organization was an intern in the legal department. In 2012, MGA went through a leadership change when the executive director was unexpectedly (seemingly) fired by the board of directors.... [tags: Leadership, Management, Executive director]
872 words (2.5 pages)
- Introduction The increased incidence of the economic crisis in affect to all the world economy, especially the leading developed country, United States and Britain in1980’s (Weir & Laing, 2001) and has become to importance of corporate governance and also in developing countries (Rasiah, 1999), The economic loss and damage of investment of investors are the result of inefficiency of corporate governance, which caused of lack of the inspection and monitoring the actions of management and directors should protect the interests of the shareholder from inappropriate behavior that is include dishonest, misconduct or even distort the number in financial statements to mislead the stakeholders make... [tags: Theory, Corporations]
2021 words (5.8 pages)
- There are the three main categories of the local and global church needs, non-Christian needs, and non-human needs to which I may distribute the money. Keller argues that the church should not provide for only those within the church, but those outside of it as well, paralleling the provisions commanded for the strangers and aliens of the Old Testament (Keller, 13-14). He also suggested that we should not give to others with the condition that they are a Christian or will become one after the aid.... [tags: Stewardship]
1625 words (4.6 pages)
- Agency Theory is the supposition that explains the relationship between principals and agents in business. The theory dates back to the early 1960s and 1970s when economist began exploring risk sharing among individuals (Eisenhardt p 58). The theory is commonly discussed in the context of the Principal/Agent Model. A key concept behind the Principal/Agent Model is that people need to delegate some of their work to others. Agency theory suggests that there is a conflict between the two parties, the principal and the agent, due to a misalignment of goals as well as different aversions to levels of risk.... [tags: Leadership, Management, Risk, Game theory]
759 words (2.2 pages)
- Question 1: The most interesting facts that you have learnt about the agency theory. 1. Agency Costs are put in place to force Management to act in the interest of owners, who are not part of the day-to-day activities. 2. There is no room for error if the Agency Theory and Cost principles are enforced on an entity. 3. Owners put a lot of faith in the Board of Directors to Manage the Company on their behalf, and rely on the Board of Directors to make important decisions that benefit the interest of the company and not that of their own.... [tags: Auditing, Financial audit, Audit]
752 words (2.1 pages)
- Introduction Agency theory means that the agent who are the directors of the company is under contract to act on best interest of the principals who are the shareholders. Agency problem arises due to the fact that there is a breach of trust where the directors are acting on their own self interest instead of shareholders’. In regards to the problems, there is also an information of asymmetry, which would described as the agents would have more information than the principals. Executive Summary Agency Problems Reportedly there are numerous corporate scandals throughout the years, for example Robert Maxwell (1991), Barings (1995), Enron (2001), Lehman Brothers (2006).... [tags: Corporate governance, Board of directors]
775 words (2.2 pages)
- Agency Theory or Principal Agent Theory is the relationship that involved the contractual link between the shareholders (the principals) that provide capital to the company and the management (agent) who runs the company. The principals will engage the agent to carry out some services on their behalf and would normally delegate some decision-making authority to the agents. However, as the number of shareholders and the complexity of operations grew, the agent, who had the expertise and essential knowledge to operate the business and company tend to increasingly gained effective control and put them in a position where they were prone to pursue their own interests instead of shareholder’s int... [tags: managers, efforts, shareholders]
625 words (1.8 pages)
- Around the world in Christian and secular circles we hear the word stewardship. Not only is stewardship one of the basic issues discussed in scripture, but it’s also something we neglect as something we need to concentrate on while going through our own Christian walk. We live in a society that is very individualistic, concentrating on whatever will bring pleasure and make us feel good. Stewardship definitely doesn’t fit into the way society is today. Before going to far into this, what exactly is stewardship.... [tags: essays research papers]
784 words (2.2 pages)
- Stewardship 10-12 John 3:17 CHILDREN OF GOD; AND THAT IS WHAT WE ARE. CHILDREN COME INTO OUR LIVES…AND LOVE ALL THROUGH LIFE, EVEN THOUGH THEY MEY GROW OLDER AND MOVE AWAY BUT WE WILL ALWAYS CONSIDER THEM OUR CHILDREN. THE SAME IS TRUE AOUT EACH OF US WE ALWAYS ARE GOING TO BE GODS CHILDREN NO MATTER WHAT OUR AGE OR CIRCUMSTANCE AND GODS LOVING PRESENCE IS ALWAYS WITH US. AS CHILDREN HE TEACHES US WHAT WE NEED TO KNOW TO FULLY LIVE OUR LIVES. EVERY MOMENT OF OUR LIVES IS ONE IN WHICH WE CAN LEARN MORE ABOUT OUR SELVES, ABOUT THOSE AROUND US, AND MORE ABOUT OUR WONDERS WITH GOD.... [tags: Papers]
782 words (2.2 pages)