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    704777-Theories of Corporate Governance

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    Jeff Cadava
    The document summarizes four main theories of corporate governance: 1) Agency theory views managers as self-interested agents and owners as principals seeking to monitor managers. 2) Stewardship theory sees managers as stewards aligned with owners' interests rather than self-interested agents. 3) Stakeholder theory considers a company's responsibility to parties beyond just shareholders like employees and communities. 4) Sociological theory examines issues of power, wealth distribution, board composition, financial reporting and equity in corporate governance.

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    704777-Theories of Corporate Governance

    Uploaded by

    Jeff Cadava
    273 views7 pages
    The document summarizes four main theories of corporate governance: 1) Agency theory views managers as self-interested agents and owners as principals seeking to monitor managers. 2) Stewardship theory sees managers as stewards aligned with owners' interests rather than self-interested agents. 3) Stakeholder theory considers a company's responsibility to parties beyond just shareholders like employees and communities. 4) Sociological theory examines issues of power, wealth distribution, board composition, financial reporting and equity in corporate governance.

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    704777-Theories Of Corporate Governance PPT

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    The document summarizes four main theories of corporate governance: 1) Agency theory views managers as self-interested agents and owners as principals seeking to monitor managers. 2) Stewardship theory sees managers as stewards aligned with owners' interests rather than self-interested agents. 3) Stakeholder theory considers a company's responsibility to parties beyond just shareholders like employees and communities. 4) Sociological theory examines issues of power, wealth distribution, board composition, financial reporting and equity in corporate governance.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    273 views7 pages

    704777-Theories of Corporate Governance

    Uploaded by

    Jeff Cadava
    The document summarizes four main theories of corporate governance: 1) Agency theory views managers as self-interested agents and owners as principals seeking to monitor managers. 2) Stewardship theory sees managers as stewards aligned with owners' interests rather than self-interested agents. 3) Stakeholder theory considers a company's responsibility to parties beyond just shareholders like employees and communities. 4) Sociological theory examines issues of power, wealth distribution, board composition, financial reporting and equity in corporate governance.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 7

    Theories Of Corporate

    Governance PPT
    Theories Of Corporate Governance PPT

    01 Agency Theory 

    02 Stewardship Theory

    Governance means the process of decision-


    making and the process by which decisions 03 Stakeholder Theory
    are implemented 

    04 Sociological Theory
    Theories Of Corporate Governance PPT

    01
    Agency
    Theory Agency Theory Manager acts as agents Governance approach is materialistic
    Behavior pattern is individualistic, opportunistic & self-serving Managers are
    motivated by their own objectives Interests of the managers and principals differ
    The role of the management is to monitor and control Owners’ attitude is to avoid
    risks Principal-Manager relationship is based on control Stewardship Theory
    Managers act as stewards Governance approach is sociological & psychological
    Behavior pattern is collectivistic, pro-organizational & trustworthy Managers are
    motivated by the principal’s objectives Interests of the managers and principals
    converge The role of the management is to facilitate and empower Owners’
    attitude is to take risks Principal-Manager relationship is based on trust Agency
    Theory Vs Stewardship Theory A) Behavioral Differences
     Stewards whose motives are aligned with the objectives of their principals.
    02  A steward’s behavior will not depart from the interests of his / her
    organization.

    Stewardship  Control can be potentially counter productive, because it undermines the


    pro- organizational behavior of the steward, by lowering his / her
    motivation. “Stewardship refers to the responsibility of the board to oversee
    Theory the conduct of the business and to supervise management which is
    responsible for the day-to-day conduct of the business. In addition, as
    stewards of the business, the directors function as the catch-all to ensure no
    issue affecting the business and affairs of the company falls between cracks.”
    Canadian Guidelines
    Stakeholders = Shareholder Group + Non-
    shareholder Group Employees Customers Dealers
    Government Society at Large

    Criticism of the Stakeholder Theory


    03 • Not applicable in practice by Corporation
    • Comparatively little empirical evidence
    • Difficulty of defining the concept
    Stakeholder • Leading to chaos
    • Opening doors to corruption

    Theory
    Shareholder vs Stakeholder Approaches Shareholder
    • Obeying the law
    • Maximizing shareholder’s wealth Assumption – Perfect
    Competition Stakeholder
    • Board & Management have responsibilities to parties
    other than shareholders.
    • Profit maximization subject to the constraint of
    respecting obligations owed to such stakeholders.
    04
    Sociological Theory

     Power & Wealth  Disclosure


    Distribution

     Board Composition  Auditing

     Financial Reporting  Equity & Fairness


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