Stewardship and Governance: Key Theories, Contributions, and Relationship to Effective Governance

This report discusses the key theories of governance, including agency theory, resource dependency theory, and stakeholder theory. It also explores the contributions of stewardship theory to effective governance and the relationship between leader's values and beliefs to effective governance. The report focuses on Woolworths, a multinational retail and supermarket chain, and how it implements these theories and practices.

STEWARDSHIP AND
GOVERNANCE

Table of Contents
INTRODUCTION...........................................................................................................................1
KEY THEORIES OF GOVERNANCE..........................................................................................1
Overview................................................................................................................................1
Agency Theory.......................................................................................................................1
Resource Dependency Theory................................................................................................3
Stakeholder Theory................................................................................................................4
CONTRIBUTIONS OF STEWARDSHIP THEORY.....................................................................5
Customer Engagement............................................................................................................5
Employee Empowerment.......................................................................................................6
Working Environment............................................................................................................6
RELATIONSHIP OF LEADER'S VALUES AND BELIEFS TO EFFECTIVE GOVERNANCE
..........................................................................................................................................................6
Ethical Hiring.........................................................................................................................7
Sustainability..........................................................................................................................7
Inclusive Leadership...............................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Stewardship refers to an appropriate procedure which leaders and managers of a company
implement in context of taking care of business practices in such a way which helps them ensure
sustainability in the structure and culture, along with responsibly fostering the organisation in an
effective and productive manner. On the other hand, Governance refers to the practices adopted
by an organisation to appropriately and effectively ensure transparency, fairness and
accountability within all the operations and functions of a firm (Oetzel and et. al., 2015). In this
relation, the report below is based on Woolworths, which is one of the most recognised and
preferred retail and supermarket chains within the UK. The assignment covers a detailed
discussion of key theories that are associated with governance that have contributed towards
achieving effectiveness within the organisation. Furthermore, the report includes contribution of
Stewardship Theory to effective governance within the firm. In addition, a detailed discussion
associated with relationship of values and beliefs of leaders to effective governance within the
organisation is also included within the report.
KEY THEORIES OF GOVERNANCE
Overview
Corporate Governance is the practice that is necessary for each and every organisation to
follow in today’s world where there is a high level of awareness amongst customers,
communities and individuals associated with an organisation. In addition to this, it allows a
company to maintain an appropriate culture which contributes in an essential manner towards the
people associated with the company, as well as society (Fitzpatrick, 2014).
Woolworths is a multinational organisation which deals in several retail offerings and has
a wide product portfolio as well as a big management team which handles the operations of the
company. Its corporate governance could hence be reflected by several theories which contribute
in relation to enhancing the effectiveness of the firm in relation to implementing and embedding
governance within its structure and culture. Therefore, in this context, the key theories of
governance are explained below:
Agency Theory
One of the most prominent theories associated with Corporate Governance is Agency
Theory. This theory appropriately defines relationship between several principals related to the
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company, such as the shareholders, as well as the agents of the firm, which are the directors. This
theory works on the notion that the agents are hired by the principals to perform in an
appropriate manner. Furthermore, appropriate delegation of the same takes place where the tasks
are allotted by the shareholders to the directors to ensure smooth running of business. Moreover,
according to this, theory, agents must take appropriate decisions that serve in the best interests of
the principals (Toivonen & Toivonen, 2014).
However, there is a very prominent aspect that is associated with this theory. For instance,
agents might have their personal agendas or priorities related to their self interests which could
heavily influence the decision of these individuals. Apart from this element, decisions taken by
the managers or directors of the company might not necessarily align with the ones which are
expected by the shareholders. Hence, this notion separates the ownership and control within the
company. Moreover, in such cases accountability of actions falls upon the employees.
Additionally, to ensure that the priorities of managers are very much considered and fulfilled by
the employees, methods such as rewards or punishments could conveniently be used by the
shareholders.
One of the most appropriate arguments associated with this theory relates with the fact that
principals could suffer agency loss, which refers to relatively lesser return on their investment as
their role is not related to the active management of the organisation. Hence, to enhance the
scope of this return, either a strict control is implemented within the organisation, or managers
and executives of the firm are fairly incentivised.
In context with Woolworths, there are several ways through which the firm could
implement positivity in terms of aligning the organisation’s executives’ interests with that of the
shareholders. This could be done through several ways which are discussed below:
 The firm could appropriately ensure enhancement in equity which is owned by the CEO
and fellow managers in power, which would further ensure the alignment of the interests
of these individuals with that of the stakeholders (Joslin, & Müller, 2016).
 Moreover, a slightly opposite approach which the company could undertake is related to
the fact that the investors, along with the board could monitor the managers of the firm
in order to ensure reduction in incentives in case they put their own interests ahead of
that of the shareholders.
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Resource Dependency Theory
As per this theory, it emphasises appropriately upon the role of board of directors in
relation to enhancing accessibility of resources that could be utilised by the organisation in
context of appropriately working and functioning towards the organisational objectives.
Directors have an active role in relation to securing certain resources that the company would
need to effectively complete the tasks through staying connected and establishing linkages with
the external environment. This provision of resources is very much effective in context of
enhancing the performance of the organisation. Some of the key resources which the directors
could bring within the company is related to skills, information, constituents like buyers, sellers,
social groups and so forth (Mengerink and et. al., 2014).
Hence, this theory argues that directors are required to intervene within the processes of
the company to ensure that the employees are very much accessible in relation to outside
resources, which they would need to enhance the organisational performance. This would help
the firm in getting stronger in context of human, financial as well as intangible supports. It is
perhaps one of the most appropriate theories which could be utilised by the organisation as
resources are the key performance requirements that are needed within an organisation to
function in its fullest potential.
Woolworths has implemented this theory pretty well within the organisation in order to
ensure that the firm is filled with resources that is necessary to ensure sustainability as well as
effective growth. There are two prominent examples in relation to this company that are
explained below:
 Information:
One of the key resources which the directors have managed to bring in within the company is
associated with information, reflects the data across the market directed towards several of its
factors that is necessary for strategy formulation and implementation. Quite recently,
Woolworths has enhanced its online management information system within the infrastructure of
the company. For instance, SAP based merchandising system has been implemented within the
company, which is an effective platform, that the company to acquire information, along with
ensuring back office operations in an effective manner (Woolworths' next IT overhaul, 2019).
 Skills:
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Another resource associated with the organisation is skills, which is one of the most
appropriate resources that is needed to make the firm competent. For example, the directors
ensure that Woolworths has appropriate training programme, which is directed towards
increasing the competence within the employees in the organisation. One such training
programme within the organisation is related to Simulations, where mock situations are created
in front of employees to enhance their competence and performance level.
Stakeholder Theory
This theory appropriately focuses upon the accountability of the management in relation to
broad ranges of stakeholders. This theory is related to the relationships which are required to be
managed by managers of an organisation with their stakeholders such as employees, suppliers,
the CEO and so forth. Hence, the notion which it supports is related to the fact that managerial
decisions which are taken by the managers must uphold the stakeholders’ interests in relation to
enhancing these relationships (Müller, & et. al., 2016).
This theory appropriately and effectively argues that managers of a company have a social
obligation towards each of the stakeholders of the firm. Moreover, it is appropriately subjected
towards Corporate Social Responsibility of these managers. Hence, the decisions as per this
theory are required to be ethical even if that means lower and inconsistent profits within the
future.
Hence, in context with Woolworths, this theory is very much appropriate in relation to
highlighting the scope of enhancing the stakeholders’ satisfaction. This could be reflected by
evaluating several stakeholders below: Customers: The firm implements a customer centric approach through acquisition of
feedbacks and developing a business model which fully supports the customers in terms
of high valued products and services. Employees: The leadership adopted within the company is Democratic, which empowers
individuals in context of taking effective decisions and exercising limited, yet effective
authority towards the company as well as its major decisions.
 Community: Sustainable practices, along with appropriate adherence towards
environmental protection are promoted within the culture of the firm. This could be stated
through the fact that the firm uses lean methods, along with supply chain management to
ensures that there is no harm caused by the actions of Woolworths and hence, this theory
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is very much contributing in terms of enhancing the effectiveness of the firm in context
of Corporate Governance (Martin, 2016).
CONTRIBUTIONS OF STEWARDSHIP THEORY
Stewardship Theory is the one which states that the protection of the company is the
responsibility of managers as well as directors, that are the directors and executives of the
organisation. Moreover, they work towards enhancing the wealth of the company through
maximising the performance of the company (Landon-Lane, 2018). Moreover, these individuals
are motivated and encouraged through organisational success. In addition to this, autonomous
performance is required by employees as well as directors to ensure that the returns provided to
shareholders are very much acquired by the same. Hence, in this context, employees own the
tasks and duties provided to them in a way which maximises effective working within the
organisation.
Moreover, this theory argues that the executives and managers of a company share
mutual goals towards which they are required to function. Furthermore, in order to ensure
effectiveness within the same, the board is required to be less controlling. Therefore, it is
required that support is provided by the board to empower the executives as well as enhance their
performance in an appropriate manner. Moreover, this relationship between the executives and
board involves effective mentoring, training as well as shared decision making.
In relation to Woolworths, this theory has effectively contributed in relation to enhancing
the effectiveness of the company in context of corporate governance. Hence, these contributions
within the firm's management are reflected through several pointers below:
Customer Engagement
One of the major contributions of stewardship theory in context of the organisation is
associated with enhancing customer experience and engagement (Le Breton-Miller & Miller,
2018). The reason for this aspect is that due to development of stewardship, employees are very
much engaged within the operations of the company and are trained enough to ensure that the
work allotted to them is accomplished at the fullest potential as accountability is highly promoted
in this theory. Furthermore, this helped employees at Woolworths in context of highlighting this
element within the culture, which led to high end delivery and customer service. Furthermore,
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this contribution has led to benefits to the company's current customer centric business models in
an effective manner.
Employee Empowerment
Another appropriate contribution of the stewardship theory towards enhancing the
effectiveness of the company when it comes to corporate governance is that it allows the
executives of the empowerment of the employees within the firm. This is done through providing
them advanced and effective training methods and subjecting mentoring towards them which
allows them to enhance their competence and performance towards the objectives of the
company. furthermore, the support provided by the executives of the firm empowers them to take
effective business decisions within the company. This is a major contribution within the
company to ensure corporate governance, as employees must be treated in an effective manner
and must be subjected towards empowerment which is a key consideration of driving the
company towards corporate governance (Kruitwagen, & et. al., 2017).
Working Environment
A prominent, progressive and effective working environment is a necessity for the firm to
ensure corporate governance within the structure and culture of the company. Stewardship theory
ensures trust and transparency within the company in context of both the board as well as the
executives and employees, which allows development of working environment in an effective
manner. Moreover, this also enhances the scope of improvement when it comes to ensuring
corporate governance as each of the stakeholder within Woolworths is rightfully communicated
and shared effective information which is a key consideration of the company.
RELATIONSHIP OF LEADER'S VALUES AND BELIEFS TO EFFECTIVE
GOVERNANCE
For an organisation, it is required that the leaders' values and beliefs ensure governance
within the company. In addition to this, determining this relationship is equally necessary so that
the organisation functions in an effective and progressive manner (Krzeminska & Zeyen, 2017).
In terms of Woolworths, the values and beliefs of its CEO Brad Banducci appropriately aligns
with the corporate governance in several manners that are explained below:
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Ethical Hiring
One of the most appropriate value and belief of the CEO of Woolworths is related to
ethics. He has been appraised for his ethical practices and essential values, which are required to
highlight the scope of success within the company. Moreover, this has a relationship with
effective governance as he is very much inclined towards ethical hiring. This reflects the fact that
he hires individuals on the skills and competencies against the job roles regardless of their
cultural and social orientation. This relationship ensures that diversity is very well maintained
within the organisation and hence, fulfils the ethical demands of the company.
Sustainability
Another belief of the CEO of Woolworths is associated with the fact that the business
practices must be sustainable to ensure effective growth. Hence, in this context, the practices
within the firm and new models after his hiring was subjected to appropriate and effective
adherence to sustainable practices towards the environment as well as managing people within
the company.
Inclusive Leadership
This aspect relates with the fact that a rather inclusive leadership is very much adopted
and implemented with the firm. This is related to the employees of the company and ensures
their empowerment. This is managed by the CEO is that the organisation through developing a
culture where transparency and communication are the crux of management and hence,
employees are involved in a democratic manner to contribute in the company's functions and
strategies (Winter & Davidson, 2017).
CONCLUSION
Hence, it is concluded from the report that Stewardship and Governance are effective
aspects to be practised by a company. Furthermore, analysis and evaluation of different key
theories of governance allows in determining the way in which this aspect could be promoted
within the firm. Moreover, stewardship theory also contributes in enhancing the effectiveness of
the company in relation to corporate governance through appropriately facilitating the
transparency and honesty in the culture. Lastly, values and beliefs of leaders of an organisation
must directly link with the governance to ensure effectiveness in the working of the company.
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REFERENCES
Books and Journals
Fitzpatrick, M. (2014). From boom and bust to local stewardship: a governance benchmark for
Celtic Sea fisheries management. In Social issues in sustainable fisheries
management (pp. 43-63). Springer, Dordrecht.
Joslin, R., & Müller, R. (2016). The relationship between project governance and project
success. International Journal of Project Management. 34(4). 613-626.
Kruitwagen, & et. al. (2017). Game theory and corporate governance: conditions for effective
stewardship of companies exposed to climate change risks. Journal of Sustainable
Finance & Investment. 7(1). 14-36.
Krzeminska, A., & Zeyen, A. (2017). A stewardship cost perspective on the governance of
delegation relationships: The case of social franchising. Nonprofit and Voluntary Sector
Quarterly. 46(1). 71-91.
Landon-Lane, M. (2018). Corporate social responsibility in marine plastic debris
governance. Marine pollution bulletin. 127. 310-319.
Le Breton-Miller, I., & Miller, D. (2018). Looking back at and forward from:“Family
governance and firm performance: Agency, stewardship, and capabilities”. Family
Business Review. 31(2). 229-237.
Martin, P. (2016). Ecological restoration of rural landscapes: Stewardship, governance, and
fairness. Restoration Ecology. 24(5). 680-685.
Mengerink, K. J., & et. al. (2014). A call for deep-ocean stewardship. Science. 344(6185). 696-
698.
Müller, R., & et. al. (2016). A framework for governance of projects: Governmentality,
governance structure and projectification. International Journal of Project
Management. 34(6). 957-969.
Oetzel, J. G., & et. al. (2015). Enhancing stewardship of community-engaged research through
governance. American Journal of Public Health. 105(6). 1161-1167.
Toivonen, A., & Toivonen, P. U. (2014). The transformative effect of top management
governance choices on project team identity and relationship with the organization—An
agency and stewardship approach. International Journal of Project Management. 32(8).
1358-1370.
Winter, J. S., & Davidson, E. (2017). Investigating values in personal health data governance
models.
Online
Woolworths' next IT overhaul. 2019. [Online] Available Through:
<https://www.itnews.com.au/news/woolworths-next-it-overhaul-472701>
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