Governance and Stewardship: Analysis of Australian Organizations

This essay provides an in-depth analysis of governance and stewardship within Australian profit and non-profit organizations. It begins by defining corporate governance and differentiating between good and bad governance practices. Various governance theories, including transaction cost economics, resource dependence theory, managerial and class hegemony, agency theory, and stewardship theory, are explored. The essay then focuses on stewardship theory, detailing its application in both profit and non-profit organizations, using examples like Coles and Australian banks. The benefits of adopting a stewardship theory approach in organizational governance are highlighted, emphasizing the creation of healthy communities, environmental conservation, and long-term sustainability. Finally, the essay discusses the crucial role of leadership in effective governance, asserting that strong leadership is essential for organizational success and stakeholder satisfaction. The document is available on Desklib, a platform offering study tools and solved assignments for students.

ASSESSMENT 3
Governance and Stewardship Paper
Name: Harpreet Singh

Table of Contents
Introduction......................................................................................................................................3
Corporate Governance.....................................................................................................................4
Good and Bad Governance..........................................................................................................4
Governance Theories.......................................................................................................................5
a. Transaction cost economics..................................................................................................5
b. Resource Dependence Theory..............................................................................................5
c. Managerial and class hegemony...........................................................................................6
d. Agency theory.......................................................................................................................7
e. Stewardship theory...............................................................................................................7
Stewardship Theory.........................................................................................................................8
Stewardship for profit organisation.............................................................................................8
Stewardship for non-profit organisation......................................................................................9
Benefits of stewardship theory approach in organisational governance...................................10
Leadership and Governance..........................................................................................................11
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

Introduction
For the long-term sustaining objective to be accomplished, a strategic implication of
organisational governance is necessary. While undergoing globalisation, significant management
and arrangements to turn in social responsibilities efficiently, every marketing, profit and non-
profit, must undergo strict adoption of certain patterns and structures to be followed. It can be
extended as policies for the continuous monitoring and proper implementation of them, by a
structure of the organisation. Following assignment is an evaluation of diverse governance stages
in profit and non-profit organisations of Australia. A thorough detailing of stewardship theory, in
particular, is provided. The necessity of leadership and its effects on governance in the
organisation are also discussed. Assertions to establish the belief that sound governance structure
is not only required for efficiency enhancement but for a great amount of profit based benefits
for stakeholder as well are also included in this assignment.

Corporate Governance
For organisations to process and progress up to potential, strategic set of policies, practices and
rules are introduced. With these introductions, firm control or direction on an organisational
structure can be implemented. One major component of the corporate sector, to be kept in focus
is a sheer balance of interest that is among company’s stakeholders and shareholders. Apart from
the conductive set, corporate governance also provides a framework in order to achieve the
objectives of the company. (Salim, et. al., 2016) This includes asserted management structure,
action plans and sphere of internal control & monitoring.
The major objective of corporate governance to be in existence is to embrace the investor’s
relations and interests efficiently. In time there had been proposed numbers of governance
theories and practices. But there is need to understand the need for implementation of
governance for a firm to be good. Following is a brief of governance's importance by evaluating
natures of governance and their impacts:
Good and Bad Governance
When a firm undergoes circumstances of bad governance a flare of doubt in company's cast it
appears. This depletes brand reliability and integrity; obligations of company's shareholders are
disturbed to terms where they face an issue in their financial health (Schultz, et. al., 2015).
Communication gaps are induced in cases with bad governance, rupturing the work-environment
and culture. This further leads to rupture of organisational internal states with complete chaos
among the workforce.
A well-governed corporation enjoys effective corporate citizenship and stakeholder relationships.
Strictly managed and executed processing is conducted with the adoption of ethical behavioural
and sound practices. Apple’s governance segment, for example, is a collection of segregated
teams (Reynolds, 2014). It has a board of directors along with charters for significant governance
of documents. This strict management and practices is the key to reliable and accountable nature
of this brand.

Governance Theories
With an agenda to improvise the organisational and processing arrangements while maintaining
healthy relationships with its stakeholders and achieving objectives, many authors came up with
strategic theories. A few of them have been briefly described as follows:
a. Transaction cost economics
This theory concentrates on the economic well-being of a company. With the implication
of this theory, a balance in between expenditure or cost and company's benefits is
generated. Addressing the company's market economy, under this theory segregation of
organisational structure is executed into a significant hierarchy (Van, et. al., 2016). These
segmented sections perform to their potential to use resource provided to them in an
efficient manner. These segments are argued to be stated under economic governance.
Figure 1: Transaction cost economics Model.
(Source: IS Theory, 2015)
Above figure 1 reflects a generalised ideology of transaction cost economic theory. Any
transaction in between two firms can be classified as internal and external transactions
costs. Maintenance of this balance is the main objective of this theory.
b. Resource Dependence Theory
Companies in progress are completely dependent on its resource availability and quality
to perform to its potential. Under the resource dependence theory, it can be stated that
there is urgency in every organisation to tactically handle all its internal and external

resources (Aura, et. al., 2015). This bound of any firm with the environment is referred as
resource dependence. In accordance with this theory, a separate committee that can
effortlessly handle the entire financial, workforce and other complicated matters must be
set up for resource dependence management and significant decision making included in
it.
Figure 2: Generalised scheme of resource dependence theory
(Source: Delke, 2015)
Figure 2 shows how one organisation is surrounded with essential environmental
resources for it to interact with other and thus make dealings. This theory must be
adopted for increased performance levels, stabilised environment and reduced
constraints.
c. Managerial and class hegemony
This theory focuses on the power segment of the management part of any organisation.
The structural pattern is emphasised dividing directors and seniors of the company as an
executive elite class which contains most of the decisive and impacting power (Benn, et.
al., 2014). Even after researchers and uplifted working culture in the corporate sector, the
psychological aspect agrees with the power and class to be dominating and critically firm
in organisation and practice.

Class hegemony is applied when directors are the dominating characters and are
considered elite. Their existence overshadows the experience and skill that other
structural segments contain (Bernstein, et. al. 2016). Managerial hegemony is applied
when management section of an organisation is so knowledgeable regarding company's
operations that they dominate directors. They have a major influence on decision making
thus making directors dependent on them.
d. Agency theory
Figure 3: Agency theory Model
(Source: Finanzas para mortales, n.d.)
This theory focuses on the relationship between organisational principals and the
company agents in contact with them. The theory proposes to avoid any goal dis-
orientation or mismatch conditions that can rupture the processing on go and create
conflicts between the two parties (Bolden, 2016). Stakeholders play a major role to be
pleased in every manner possible in every decision and condition that occurs.
e. Stewardship theory
Proposed by Donaldson and Davis in 1991, this theory on contrary to managerial and
class hegemony theory, place no higher authority in particular control of ownership. It is

more of executive action-oriented practice. The major concentration and objective of this
theory are to keep in focus the interests of its shareholders (Bryson, 2018). The following
section elaborated its effect on organisational governance.

Stewardship Theory
Under the stewardship theory, major decisive powers are handled by management and not the
board due to more of organisational knowledge; however, the action-oriented with the
implication of this theory, the major interest must be paid to company’s shareholders. Service is
concentrated to be provided at the best possible quality level (Macdonald, et. al., 2017). The
profit-based benefits are aimed to be maximised from the perspectives of shareholders. This
theory is a contrary base for agency theory, where the board of directors play major decisive
roles and interest of stakeholders is considerably more. For example, McDonald's is an MNC
which works for its profit increment for the sake of its shareholders, keeping their interest and
ideologies of expectation in stakes.
Figure 4: The stewardship Theory Model
(Source: Research Gate, 2016)
Figure 4 reflects how decisions and actions revolve around shareholders’ interest. The cyclic
relationship can be reflected between stewards and shareholders.
Stewardship for profit organisation
Coles, for example, is a private supermarkets chain firm having over 100,000 employees with
waste Australian market. In order to manage this firm growth, a stiff organisational structure is

necessary to be adopted. The brand chain as it expands need optimistic work-environment and an
open communication line for its employees to progress (Maduka, et. al., 2018). The shareholders
of the chain are largely benefitted with the stewardship based governance kept in practice.
Maintenance of effective relationship with all the customers and market connections is possible
with strategic segregation of organisational structure of Coles. Another example is of the
introduction of transparent reporting practiced by firms like Novo Nordisk and Anglo-American.
Figure 5: Stewardship for sustainability
(Source: svenaake, 2012)
As is reflected in figure 4 corporate sector these days are more concerned about their effective
sustainability and not just sustainability. The changing environment has brought upon some
constraints to be followed for long-term growth and action plans (Weber & Mayer, 2014). The
vision for just benefits have lesser of scope today to grow, rather quality employability and
equitability are more sought.
While engaging a steward in organisational process implicates that he has to manage the assets
of someone else, those are shareholders, and simultaneously linking self-profit from it.
Stewardship requires shareholders to put their trust and assets into directors or management’s
hands. This is one of the most legally accepted governance patterns around the globe.

Stewardship for a non-profit organisation
Australian banks are the aptest example of a non-profit organisation that follows stewardship
governance. Salim, et. al. (2016) identified that size of the network under stewardship has a
significant positive effect on the efficiency of Australian banks. They claimed that under this
theory when applied to non-profit organisations enables them to take better and effective
decisions those are in favour of shareholders. The decision quality enables the form to make
maximum profit and possess better insights.
Since the organisations with non-profit aims share most of their aims with other collaborating
firms or numerous shareholders, they generate a sense of empathy and morally sound
characteristics in practice. All the collective organisation and structuring endorsed provide major
motivation to its shareholders (Mathieu, et. al., 2014). With improvised and trusted relations with
the shareholders, the sustaining life of firm can be increased. More of funding sources and
connections can be established. The initial engagement of such approach for a non-profit cause
can be costly in nature; however, with time and improvised processing, this cost can be reduced
to a larger extent.
Benefits of stewardship theory approach in organisational governance
Several of the major positive impacts of stewardship theory on any organisational governance
have been listed as follows:
 Creation of healthy community, employee and organisational system
 Focusing on shared values
 Environmental conservation rather than exploitation
 Long-term focus on sustainability and effectiveness of organisation Establishment of
sustainability in the business world
 Increased collaboration for the creation of a global system inducing senses of justice and
equity


Leadership and Governance
It is accepted all over the corporate world that without an effective leadership an organisation
cannot be run. From action planning, information movement and execution no process can be
executed without proper guidance and management that is performed by a leader. The leadership
can be seen at diverse levels of organisational structure. The board of control is in main
leadership while under it stays executive leaders, departmental leaders and team leaders. This
chain of authority is what binds a segregated amount of workforce into an organisation as one
(Schermann, et. al., 2016). In order to accomplish sustainability and market reliability, a firm is
an inevitable need to be working under strong and strategic leadership. On a broader perspective,
it can be deduced that growth of organisation and shareholders is in parallel relation to the
quality level of leadership it is under.
Figure 6: Leadership in governance
(Source: MILWA.org, 2018)
Organisational governance can be stated successful, with its tendency to attain highest levels of
transparency of information and constraints, the participation of its entire workforce to maximum
potential and accountability of governing executive to its stakeholders in every situation. Quality
governance can be attained when the opinion of even the weakest and least influencing group is
considered in decision making. This entire stated phenomenon can be made socially,

economically, politically and personally sound for organisational as well as stakeholders by just
one exact adoption, which is firmly applied quality leadership (Schermann, et. al., 2016). A good
leader is able to maintain all the relations related to working process with efficient
communication and inspirational skills. He must be able to engage minimum resources for
maximum output. The trust generated by a leader among its followers aids any organisation to
successfully attain its objectives.
Several essential qualities of a good leader are briefed as follows:
 Competency
The leadership skills those can contribute to the enhancement or development of the
organisation and fellow workforce can be termed as leadership competencies. A quality
leader must possess superior performance for him to be visible to his followers (Schultz,
et. al., 2015). The core competencies that a leader must possess are interpersonal skills,
courage, decision making and political skills, higher EQ and IQ levels etc. With these
introduced governances can become seamless with effective results.
 Impacts and influence
For a leader to be impacting and influencing for his followers, he must possess some
wonderful amount of experience with exceptional convincing power. He must be able to
show his followers some newer path and ideology that are worth following. He must be
well aware of the situation and consequences better than his followers so that he can help
them grow safe and sound. With this in practice, organisational governance can attain
morally sound influencing quality attracting more of workforce and stakeholders.
 Relationships
One of the sole duties of a good leader is to maintain a healthy and productive
relationship with all his contacts. He is in mandatory need to take long and work with all
the employees under him, this collective movement can be accomplished with significant
and effective communication (Van, et. al., 2016). He is in bounds to be constructive with
his words in addition to being motivating and inspiring with every of his action. His voice
must reflect all the voices under him for a quality governance and decision making.
 Accountability

With every increasing level of leadership in a corporate organisation, the amount of
responsibility held increases. With the responsibility of actions and decisions made, the
expectations of stakeholders for a clear answerability also increase. With employees of
varied potential working under, there is the least blaming done rather more of lesson
provision is followed (Reynolds, 2014). This makes all the outcome result appreciation
and blames to fall on leaders' shoulders. The governance with a higher level of
accountability is reliable from investors' point of view. The trust factor is developed
among various stakeholder bonds with transparent information sharing and accountability
for their interests.
Several aspects to be taken care of and best avoided to become a good leader are:
 Broken knowledge base
 Callous nature
 Aggressive behaviour, etc.

Conclusion
The preceding assignment was an evaluation of diverse governance stages in profit and non-
profit organisations of Australia. A thorough detailing of stewardship theory, in particular, was
provided. The necessity of leadership and its effects on governance in an organisation were also
discussed. Assertions to establish the belief that sound governance structure is not only required
for efficiency enhancement but for a great amount of profit based benefits for stakeholder as well
were also included in this assignment. It can be concluded that for sound growth and
sustainability of any corporate organisation, significant governance measure is required to be
adopted. Further, to effectively implement it, quality leadership is an inevitable component.

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