Seminal Theories of Governance and Stewardship in Organizations

This document discusses the key theories of governance, including agency theory, stakeholder theory, and resource dependency theory. It also explores the concept of stewardship and its contribution to effective governance in both profit and non-profit organizations. The document emphasizes the importance of leaders' values and beliefs in achieving efficient governance.

SEMINAL THEORIES OF
GOVERNANCE AND
STEWARDSHIP

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
Key theories that are contributing to the organisation effectiveness in general. ........................1
Contribution of Stewardship Theory in general to the effective governance in the non profit
organisations and profit organisation...........................................................................................5
Discussion over relationship of values and beliefs of leaders for effective governance in the
organisation. ................................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Concepts of governance could be better understood by standards regulations and norms
for social being & public awareness in the society. Governance of nation depends upon board
members & government or the association that have taken together participation in process of
strategic decision making for management. On the other hand stewardship refers to notion for
protecting the human assets & accountabilities for the future aspects. Acts of steward include
administering and organising the delegated tasks. The present report will involve analysis and
discussion of governance theories and usefulness to organisations. It would be including the
theory of stewardships for the robust governance in the profit as well as non profit organisation.
The study will also be emphasizing over the relationship between values and belief of leaders
(Krzeminska & Zeyen, (2017). Study will be providing complete understanding about the
seminal theories of stewardship and governance for informing effective leadership in the non
profit organisations.
MAIN BODY
Key theories that are contributing to the organisation effectiveness
Governance theory is significant and essential in terms of the ethical regulations of the
procedures and for securing valuable organisational asset. There are many methods and theories
some of which are illustrated below.
Theory of Agency
As per agency theory rights and operations of business are handed over by shareholders
to agents. Agents are the executive members at top level of the organisation. Agency theory
helps to understand relationships between principal and agent. Principal is represented by the
agent in the specific business transactions are to be represented in principal's best interest and
not driving self interests in the transactions. Source of conflicts are the varying interests of agents
and principals. Conflicts may arise as agent may not be able to act in the best interest of the
principal. The thing results in various disagreement and miscommunications resulting in number
of problems (Chrisman, (2019). Incompatible desires could drive trigon between shareholders
causing financial losses and inefficiencies.
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Figure 1:
Above chart specifies the strategic flows of implementing a action plan of business. In
the above chart Agent represents senior manager or the Board of Directors, mainly CEO's of
companies. Main objectives of the agency theory is enabling shareholder of company to hire
agent as explained above for organisations for taking best possible responsibilities of the
business in management and decision terms for the organisations. It is also to be noted that the
agents are not under obligations to take concerns of shareholders. Opportunistic behaviours of
agents often fall short for probability of the shareholder. Study of theory gives an understanding
that it is working resourcefully with division of control and ownership. Theory of agency helps
company in managing the checkpoints of supply chains of organisations that helps in impelling
employees for engaging in the work processes dedicatedly. Theory of agency is constructive &
influential in the nature. It is very useful for employees as it helps in developing competencies
and skills that will make them more responsible & accountable for individual tasks that are
delegated by managers. This theory is also applied for rewarding and reprimanding purpose of
rectifying precedence of agent.
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Illustration 1: Agency theory
(Source: Agency theory, 2016)

Stakeholder Theory
Theory is defined as establishment to enhance management of the organisation
specifically by maintaining equality equality in rights & opportunities of managers and
stakeholders associated with company.
Figure 2
Above diagram represents that from organisational contexts process of managerial
decision making in top level managements include similar priorities and interests of
stakeholders with the inherent values without supremacy over others. Role of the gvernment in
an organisation is to ensure and monitor that businesses are correctly executing ethical codes of
practice, that management is required to maintain properly. On other side shareholders are the
principal of company that are giving interests and shares for the business owners. They have
invested their money in company for getting adequate rate of return. Suppliers have an indirect
association with company. They are effective resources to strengthen supply chains and the
logistics of goods and services. Suppliers helps in providing quality materials to firm at
reasonable prices. Customers of firm are fundamental stakeholders specifically for whom
companies tends to run successfully over given specific market. Employees of company are
assets on which organisations are dependent for executing the business operations and the
management of firm for prosperity and outcomes (Austin & Jones, (2015). Competitors and civil
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Illustration 2: Stakeholder theory
(Source: Theory related to stakeholder, 2017)

refers to the external stakeholders of company that have high interests in firms with least share in
business. It is essential to understand that without contribution and engagement of every single
member organisations are not able to stabilise the business infrastructure in right direction.
Therefore accumulation of all stakeholders of company together is necessary for making value
and establishing brand image in society.
Theory of resource dependency
Above theory is useful for organisations in funding the resources that are suitable for the
business functions and operations. The rationale of theory is presented by the diagram.
Figure 3 :
Above figure it could be interpreted that theory of resource dependency could have
application over every kind of business organisation. The theory states that boards of company
are higher level belonging to the management of organisation having access over external
business environment. They are responsible for collecting various key resources & to secure
them to drive them into functioning process. The above figures represents that directors of the
organisation are primary channel of communications with the outer sources & channels like
buyers, makers and the financial investors of company as well. They are the basic ingredients
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Illustration 3: Resource dependency theory
(Source: Resource dependency theory, 2018)

that are essential for running business organisation and surviving in the market successful for
indefinite period of time. Ultimate motive of theory is to provide an understanding that an
organisation without the availability of adequate resources such as products and materials cannot
stand strongly in the market. It would also become difficult for organisations to gain the
competitive advantage in the market from it rivalries. For example if company is less of
resources like equipments, line of communications such as transport facilities are missing these
things can intensely affect the company. It is important to have efficient technical support team
for managing and controlling recruitment process. It will not be possible for the production
teams to deliver products ordered on time to consumers (Masaga & Arasa, (2019). That is why
dependency of resource theory is applied as an governance theory for to sustain an effortless
working process in the organisation worldwide. '
Contribution of Stewardships Theory in the general to effective governance in the non profit
organisations & profit organisation
Steward Theory and Concepts
Steward theory defined as individuals working as steward on the behalf of owners that
are leading with capabilities & power of the quasi ownership attempts in businesses. In other
terms steward refers to a simple executive or the employee of enterprise, it could also be the
middle level manager of management protecting for the purpose of profit of entity and to create
value for consumers. Concept of the theory of stewardship could be explained through given
figure
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Figure 4
The above diagram it could be derived that whole process of the responsibilities that are
performed by steward in organisation to gain sustainability and excellence in business. Simply
stewards are employees that are assigned designation of the sales or executives that are hired for
specific roles and responsibilities of jobs for achieving the goals and the objectives that are set by
shareholders. Stewards are competent for protecting and maximising shareholder's wealth. They
in turn attain highest benefit by way of incentives and the rewards or the increase in shareholder
profits. In turn this motivates motivates stewards & build trust with shareholder for continuing
business functions in the strategic process (Barante & Arasa, (2018). This is essential to
understand that every type of business organisation, functions of steward are enforced by ethical
& law, as the theory justify entire accountability & functions of the efficient stewards.
Profit Organisations
Stewards acts as the active experts for operating and managing all the business functions.
These functions are monitored and managed tactically with proper supervisions to attain
sustainability. It could be understood, in profit organisations, Stewards acts in accordance with
the vision and mission statements of organisation and the targets to achieve organisational goals.
For instance, the departmental managers such as Sales managers or Retail managers intervene &
controls activities of lower staffs below seniors. They inspect whether production processes are
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Illustration 4: Steward Theory and concept
(Source: Steward conceptual theory, 2017)

going effectively as per the strategic policies & directions that are prescribed by the directors of
company. Likewise supervisors and leaders are allocated designations for proper interventions of
supply chain networks are scrutinized for maintenance of active logistic management. Stewards
such as marketing executives on other hand are skilled expert for the research & developments of
the suitable markets chosen by higher level managers or the organizers for expansions of
businesses or for starting new businesses as well. The specialisation helps business organisations
in identifying risk and the possible problems existing in the external environment of business &
for proposing strategic marketing plans further and forwarding that to directors for making
ultimate decision. The process of maintaining business processes actively take desired
responsibility under hands by the respective steward. This enables profit organisations in gaining
prosperity &competence &increasing the value of customers in society.
For Non Profit Organisation
In non profit organisations Stewards act differently as social activists or the Volunteer for
the sake of the social benefits. Stewards acts autonomously to create recognition and value in
society. Stewards for non profit organisation could be volunteers or working agents or charitable
trusts deeply involved in social concerns. This attempts for determining facts that members
associated with not for profit organisations generally acts conscientiously to save lives of
backward and poor class, with the active actions & the medical helps given within specified time
frames. For instance, in not for profit organisations, public funds organizers or thr chairperson or
even Boards members gathered for accumulating for raising funds (Keay, (2017). The cause
may be for eduction of children or their nutritions are the independent player of field to benefit
society on large .
Discussion over relationship of the values & belief of leaders for efficient governance in the
eneterprise.
It has been analysed that leaders must be honest and empathetic and must be engaged in
respecting their team members thoughts, beliefs and ethics. This will support leader of an
organization in building up their team and enhancing efficiency of their team. It will also support
them in better governance which is very useful for their career growth. It will also support them
in achieving goals and objectives of the organization. Like for example in order to implement
better governance in organization leaders and managers of firm must engaged in making workers
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know about the vision and mission of company, they must be made clear in eyes of them so that
it will be easier for them to achieve goals and objectives of organization. Leaders must also get
involved in keeping a check upon the activities which is being carried out by their junior staff so
that production efficiency of firm can be increased (Tilba, (2017). For implementing better
governance leaders must also get engaged in doing proper market research, so that new trend can
be effectively implemented in organization. They must believe in their thoughts and ideas so that
success can be easily driven. It has been analysed that if leaders are not sure about their beliefs
then this can hamper firms success. It can reduced growth of firm and also their goodwill can get
hampered
Also organization must also understand perspective of leaders:
Leaders perspectives for motivating employees:
Leaders must involved in having positive perception as this quality will only help them in
motivating team members. They must engage in motivating individuals through their beliefs and
values which will support them in better governance. Employees can only get motivated with the
help of working experience, training facilities provided by leaders and skill development
facilities which is being provided leaders to their team members. In order to implement better
governance, leaders must get engaged in managing the administration in right way and also
taking influential decision. This quality makes sure that leaders values and belief are deeply
associated with a better governance and increasing efficiency of sub-ordinates. It has also been
analysed that if workers are not given with inspiration then they might feel deployed and it can
reduce their efficiency of work (Koutoupis & Pappa, (2018).
Leaders belief in managing diversity
It has also been analysed that good leaders encourage diversity in work place. They have
a belief that diverse culture and nature of people supports a better working environment and it
also increases the operational efficiency. In other words it can be said that organizational growth
and culture can only be managed through when policies are being effectively discharged. It has
also been analysed that an effective leader must get engaged in solving the issues that is being
faced by workers. This can be solved by them by making team members understand their
perception and beliefs. In order to solve the issues leaders must also get involved in providing
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right instruction to workers, this will support them in effective management of organization. So it
can be considered as one of the best method for governance as this will support them in reducing
conflicts and chaos which exist in organization. This aspect of leader can support growth of firm.
Effective leader also makes sure that no belief and attitude of people must get hampered while
they are implementing new rules and policies. They must also make sure that there exist effective
communication in organization and goals and objectives are being clear within every employee.
This will support in better governance.
Leaders’ perception in effective teamwork
Values and beliefs of leader are related to effectiveness of organisation for building the
effective teamwork. Teamwork of organisations could be improved by intended by disciplinary
and management action plans. Solving the problems logically is an essential quality of leader. It
delineates fact that values and beliefs of leaders drive the workforce towards the commitment &
to act as team. This is essential for organisation to achieve the success and achieving the goals
and objectives of organisation (Krishnamurthy, Fudurich & Rao, (2019). For example , a leader
is required to resolve the issues of the team members by effectively communicating with them. A
leaders should identify the reasons of conflicts and make an effective communication channel
through which members can address their grievances. Leader is required to understand the issue
of member and giving them with the best possible solutions.
CONCLUSION
After analysing all the above theories related to the governance and stewardship, it is
conclude that both stewardship and governance are interrelated to each other. Most important
factor is that the theory of stewardship is the part of governance having the capacity of
controlling and managing operations and the management of organisation source-fully. In other
terms, beliefs and values of leaders are active components enforcing actions and the decision
making process should be logical. This helps the leadership to have the effective organisations.
Therefore it helps in the establishment of sustainable organisations in society.
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REFERENCES
Books and Journals
Tilba, A. (2017). Evolution of UK corporate ownership and control: codification, governance,
transition and context. Routledge.
ONLINE
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