Stewardship and Governance

Stewardship and Governance
Running Head: Stewardship and Governance
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Stewardship and Governance 1
Contents
Introduction......................................................................................................................................2
Corporate Governance Theories......................................................................................................3
Contributions of Stewardship theory...............................................................................................6
Non-Profit Organization 7
Profit Origination 8
Leader’s values and effective governance.......................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

Stewardship and Governance 2
Introduction
Management is an important part of each organization as the same is the ultimate
authority that decides the matter of an organization and develops plan and procedures for the
same. Corporate governance is a system or a mechanism by that an entity is regulated, directed,
and controlled (Davoren, 2019). It helps management to inform what practices are required to
adopt for the development of the whole organization. In this manner, this would not be wrongful
to state that corporate governance helps the management of the company to act in an efficient
manner and provides guidelines to the same. In the present era where changes are very frequent
in organizations, corporate governance has its unique significance. In a situation where an
organization has many stakeholders by that the same get affected, managers of the business need
guidance as it becomes very difficult to manage different situations at the same time considering
other aspects such as ethics and goodness of all the stakeholders. Corporate governance includes
business managers, the board of directors, ethics committees, and every other party that is liable
to ensure good governance in the organization (Walls, Berrone, & Phan, 2012). In order to
discuss the scope of corporate governance, this is to state that the same has a wider scope and it
includes external factors in addition to internal ones. Mainly corporate governance is about
fairness, accountability, and transparency.
In other words, this is to state that corporate governance prescribes the manner in which
governance should be performed by the management. Different scholars have provided different
theories on corporate governance, that provides different principles and focus on different
aspects (Abid, Khan, Rafiq, & Ahmad, 2014).. In the presented report, the corporate governance
theories related to nonprofit organizations will be discussed. In addition to this, the manner in

Stewardship and Governance 3
which Stewardship theory contributes to effective governance in a non-profit organization will
also be discussed.
Corporate Governance Theories
As mentioned above, theories of corporate governance are different concepts. These
theories provide a different basis that business managementis required to consider while decision
making. Further, these theories prescribe the relationship of stakeholders in mutual. Agency,
Stewardship, resource dependence are some the major theories of corporate governance that are
applicable to profit as well as to nonprofit organizations and the same are discussed below in
detail.
 Agency Theory: - As the name implies, this theory defines the relationship between agent
and principals. In the context of an organization, directors are the agent where
shareholders play the role of principals (Fooladi & Chaleshtori, 2011). As per this theory,
these principal employ agents to work on behalf of principals. The principal of business
hire agents to run the business. Demsetz and Alchain introduced this theory as an
economic concept and afterward the same has been introduced as in governance as well
as in leadership. The theory highlights the role of governing bodies of an organization
such as the board of directors and members of the managing committee. Shareholder
often expects that agents of the organization will work in the best interest of principals
but it is not necessary that they always do. In actual agents may act in their self-interest
and can fail to fulfill the expectations of shareholders by not acting in the best interest of
the principals (Wan Yusoff, 2012). If to talk about the main feature of this theory, this is
to state that the same is a difference between ownership and management. In a