Stewardship and Governance

Running head: STEWARDSHIP AND GOVERNANCE
Stewardship and Governance
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1STEWARDSHIP AND GOVERNANCE
Introduction:
Governance and Stewardship is a group of activities that help in an effective
management of people or an organization. While governance is defined as the actions used to
govern an organization or people, stewardship is defined as the act of supervising people or
an organization (Council, 2015). Effective governance helps to ensure that the organizational
policies are robust and effective. It also helps to outline the responsibilities of the
organization to its stakeholders such as customers, employees and shareholders as well as the
wider community. In a corporate environment, governance can act as the mechanism,
procedures and relationship through which an organization can be directed and controlled.
Governance structures moreover help to outline the rights and responsibilities of the members
of the organization and provide a framework that can help in the decision making process on
organizational matters (Michaud, 2014). The process can involve setting out and pursuing
organizational objectives with respect to the organizational environment (Hollertz et al.,
2018).Effective stewardship on the other hand is associated with the principles of good
governance and is considered to be the cornerstones of good corporate governance (Arnold,
2018). This can also be understood as a form of ethical code for organizations that represents
a sense of responsibility of the organization towards the managing and planning of its
resources (Kohle & Fitzpatrick, 2015).
The aim of the study is to analyze the key theories of governance that have
contributed to organizational effectiveness, develop and understanding about the
contributions of stewardship to effective organizational governance as well as to discuss how
the values and beliefs of a leader is related to effective governance.
Discussion:
-Key theories of governance that have contributed to organizational effectiveness

2STEWARDSHIP AND GOVERNANCE
Organizational effectiveness is an idea about how effective an organization is towards
the achievement of its intended outcomes across several key aspects such as development of
leadership, management of talent and human capital, design and structure of the organization
(Colbert et al., 2014). According to Lawler (2018), Organizational effectiveness helps to
examine the alignment of the organizational process to the objectives, develop reliability,
speed and quality of the process, develop strategies to improve the organization and fosters
development of organizational capacity. Developing organizational effectiveness involves
dimensions such as decision making, change and learning, group effectiveness, self-
organization and adaptive systems (Tang, 2017).
Corporate Governance are the sets of activities and principles that can be used to
improve organizational effectiveness by monitoring organizational activities, policies,
practices and decision making process as well as engaging the stakeholders and corporate
agents (Tricker&Tricker, 2015). Different theories of governance exists that helps to address
the challenges faced while governing an organization and describes the relation of the
organization to its stakeholders (Aluchna&Aras, 2016). Discussed below are some of the
main theories of governance in a corporate sector:
Agency Theory:
This theory describes the relation between the principals (like shareholders) and the
organizational agents (like the directors). The theory proposes that the agents are hired by the
principals to take care of organizational operations. The responsibilities of running and
managing the business are delegated to the management and directors by the principals who
expect the agents to make decisions that are at the best interest of the organization and its
principal (Bosse & Phillips, 2016). Pepper and Gore (2015) however pointed out that agents
might submit to their own self-interest and can fail to achieve the outcomes expected by the
principal. The agency theory aims to delineate ownership of the company from its control.

3STEWARDSHIP AND GOVERNANCE
The theory further recommends accountability of the employees towards their actions and
responsibilities and priorities of the agents can be realigned by rewards or punitive measures
(Mitnick, 2015).
(Figure 1: Interaction between Principals and Agents as shown in agency theory. Source:
Bosse & Phillips, 2016)
(Figure 2: Relation between Principal, Agent and the Tasks source: Pepper & Gore, 2015)
Stewardship Theory:
According to this theory, the function of a steward is to project and maximize the
wealth of the shareholders by improving the performance of the organization. Individuals at
executive and managerial positions can act as stewards who work for the shareholders,