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- Managers and employees can be trusted to act as stewards or guardians of the corporation. This means that while they do not own the corporation's resources, they will safeguard these for the owners. A steward is a caretaker who looks after the owner's property and interests when the owner is absent
- This approach definitely makes use of the social approach to human nature. Humans, naturally and spontaneously, realize their innermost natures by forming social unions. The corporation, under this view, is such an organization. While taking on the characteristics of a social contract with the other approaches, especially agency theory, the corporation under the stewardship view is more of a cooperative, collaborative enterprise. Humans can act and find meaning in interests and concerns well beyond the confines of the ego. In fact, to organize the corporation around egoistic assumptions does harm to those capable of action on altruistic motives. The emphasis here is on building trust and social capital to strengthen the social potentialities of human nature.
- Owners still establish the cardinal objectives for the sake of which the corporation exists. But they are also responsible for providing managers with an environment suitable developing human potentialities of forming societies to collaborate in meaningful work.
- Managers act as stewards or caretakers; they act as if they were owners in terms of the care and concern expressed for work rather than merely executors of the interests of others. In other words, the alienation implied in agency theory (acting not out of self but for another), disappears as the managers and employees of the corporation reabsorb the agent function.
- Stewardship approaches are primarily value-based. They (1) identify and formulate common aspirations or values as standards of excellence, (2) develop training programs conducive to the pursuit of excellence, and (3) respond to values "gaps" by providing moral support.
Stewardship theory
External controls: fining, stock dilution, changing internal governance, court ordered adverse publicity, and community service
| Description | Example | Target of Punishment | Deterrence Trap Avoided? | Non-financial Values Addressed? | Responsive Adjustment | Interference with Corporate Black Box | |
| Monetary Exaction | Fines | Pentagon Procurement Scandals | Harms innocent | Fails to Escape | Few or None Targeted | None | No interference |
| Stock Dilution | Dilute Stock and award to victim | Stockholders (Not necessarily guilty) | Escapes by attacking future earnings | Few or None | Limited | No interference | |
| Probation | Court orders internal changes (special board appointments) | SEC Voluntary Disclosure Program | Corporation and its Members | Escapes since it mandates organizational changes | Focuses on management and subgroup values | Passive adjustment since imposed from outside | Substantial entry into and interference with corporate black box |
| Court Ordered Adverse Publicity | Court orders corporation to publicize crime | English Bread Acts (Hester Prynne shame in Scarlet Letter ) | Targets corporate image | Escapes (although adverse publicity indirectly attacks financial values) | Loss of prestige / Corporate shame / Loss of Face/Honor | Active adjustment triggered by shame | No direct interference (corporation motived to restore itself) |
| Community Service Orders | Corporation performs services mandated by court | Allied chemical (James River Pollution) | Representative groups/individuals from corporation | Escapes since targets non-financial values | Adds value to community | Passive or no adjustment: sometimes public does recognize that cs is punishment | None |
Read also:
OpenStax, Business, government, and society. OpenStax CNX. Mar 04, 2014 Download for free at http://legacy.cnx.org/content/col10560/1.6
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