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Fundamentals of Business Economics and Management · Stewardship Theory and Agency Theory of Management

Assumptions and Features of Stewardship Theory of Management

Updated 10 October 2026 · Fact-checked

Stewardship theory says managers act as stewards of the organisation. They are driven by intrinsic motivation, not self-interest, so they work for collective goals and the owners' benefit. The theory assumes trust and empowerment give the best results. To solve MCQs, match each statement to its assumption: trust, empowerment, collective goals or pro-organisational behaviour.

Understand Assumptions and Features of Stewardship Theory

Stewardship theory is a view of management. It asks one question: what drives a manager? Its answer is that most managers want to do a good job and see the organisation succeed. They are like caretakers (stewards) of something valuable that belongs to others.

The first assumption is intrinsic motivation. A steward is motivated by achievement, recognition, responsibility and the satisfaction of doing meaningful work. Money matters, but it is not the main driver. Compare this with agency theory, which assumes managers chase their own financial gain.

The second assumption is collective goals. A steward sees that his or her own interests are tied to the organisation's success. When the firm does well, the manager also gains in pride and career. So the manager puts the group's goals above personal ones. This is called pro-organisational behaviour.

The third assumption is trust. Because managers are seen as reliable, owners need not watch them closely. The theory supports empowerment: giving managers autonomy, authority and freedom to decide. Heavy monitoring and tight controls may even reduce motivation. Structures should help managers act, not restrict them.

The fourth idea is identification with the organisation. A steward shares the organisation's values and mission. Long-term commitment, loyalty and a sense of belonging follow. The owner-manager relationship is built on cooperation and not on conflict of interest.

Key formulas to remember

Core view of the manager
Steward = intrinsically motivated + collectivist + pro-organisational
Use this to classify any statement about the manager's nature under stewardship theory.
Control approach
Trust + Empowerment (low monitoring)
Stewardship favours autonomy and involvement. Agency theory favours monitoring and incentives.
Goal alignment
Manager's interest = Owner's interest
The steward sees no basic conflict, so the principal-agent conflict is assumed to be minimal.
Source of motivation
Intrinsic (achievement, responsibility, recognition) > purely financial
Do not say money is irrelevant. It is just not the main driver.

How to solve Assumptions and Features of Stewardship Theory questions

Most questions test whether you can tell stewardship assumptions from agency assumptions. Use this method.

  1. 1Read the statement and find the key words: trust, empowerment, intrinsic, collective, self-interest, monitoring, incentive.
  2. 2Ask what the statement assumes about the manager: trustworthy and committed, or self-serving.
  3. 3If it says the manager works for the organisation's goals or finds satisfaction in the job itself, it is stewardship.
  4. 4If it speaks of opportunism, conflict of interest, or the need for close control and contracts, it is agency theory.
  5. 5Check the control style: autonomy and empowerment point to stewardship.
  6. 6For 'which is NOT' questions, find the option that describes self-interest or heavy monitoring.
  7. 7Pick the option that fits every part of the statement, not just one word.

Quickest way: Keyword matching: Steward vs Agent

When to use it: Use this for any one-line MCQ on assumptions or features, when you have under a minute per question.

  1. Think of two words: Stewardship = trust. Agency = control.
  2. Spot the keyword. Intrinsic, collective, empowerment, pro-organisational, trust all mean stewardship.
  3. Self-interest, opportunism, monitoring, incentives, agency costs all mean agency theory.
  4. Cross out options that belong to the other theory.
  5. If two options remain, choose the one that matches the manager's motive, not just the control method.

Common mistakes in Assumptions and Features of Stewardship Theory

  • Saying stewardship theory assumes managers are motivated mainly by money.

    Students mix it up with agency theory, where financial incentives are central.

    Fix: Remember that stewards are intrinsically motivated. Rewards matter, but achievement and responsibility drive them.

  • Thinking stewardship theory supports close monitoring of managers.

    Students assume every theory wants control.

    Fix: Link stewardship with trust and empowerment. Monitoring is the agency theory answer.

  • Believing the theory says owners and managers have conflicting interests.

    The words 'owner' and 'manager' remind students of the principal-agent conflict.

    Fix: Under stewardship, the manager's interests are aligned with the owners', so conflict is assumed to be minimal.

  • Confusing collective goals with personal goals.

    Students read 'goals' and think of individual targets.

    Fix: A steward puts organisational and group goals ahead of personal ones, and gains satisfaction from the group's success.

  • Stating that stewardship theory says managers never need any reward.

    Students overstate 'intrinsic motivation'.

    Fix: The theory says non-financial motives dominate. It does not say pay is unnecessary.

Worked examples

Example 1

Which of the following is an assumption of stewardship theory? (A) Managers act opportunistically (B) Managers are motivated by intrinsic rewards and identify with the organisation (C) Managers need strict monitoring (D) Managers' interests conflict with owners' interests

Show the solution
  1. Identify the theory: stewardship, so the manager is a trustworthy caretaker.
  2. Option A describes opportunism, which is an agency assumption. Eliminate.
  3. Option C describes strict monitoring, again agency. Eliminate.
  4. Option D describes conflict of interest, an agency assumption. Eliminate.
  5. Option B describes intrinsic motivation and identification with the organisation, which are stewardship assumptions.

Answer: (B)

Example 2

A company's board gives its senior managers wide freedom to take decisions and does not track them daily, believing they care about the company's long-term success. Which theory does this approach reflect, and which feature is shown?

Show the solution
  1. The board gives freedom and avoids daily tracking. This is low monitoring.
  2. The board believes managers care about the company's long-term success. This shows trust and pro-organisational behaviour.
  3. Trust plus autonomy is the stewardship approach, not the agency approach, which would use monitoring and incentive contracts.
  4. The feature shown is empowerment based on trust.

Answer: Stewardship theory; the feature is trust and empowerment of managers.

Exam tips

  • Most questions are statement-matching. Learn the keywords: trust, empowerment, intrinsic motivation, collective goals, pro-organisational.
  • Expect 'which is NOT' or 'which differs' questions. Remove the agency-style options first.
  • Questions often compare the two theories. Remember the pair: stewardship = trust and empowerment, agency = monitoring and incentives.
  • There is no negative marking, so always attempt every question. Eliminate two options and guess if needed.

Practice questions from Stewardship Theory and Agency Theory of Management

Assumptions and Features of Stewardship Theory in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Assumptions and Features of Stewardship Theory: frequently asked questions

What are the main assumptions of stewardship theory?

Managers are intrinsically motivated and trustworthy. They put collective and organisational goals ahead of personal ones and identify with the organisation. Their interests are seen as aligned with the owners'.

What is the difference between stewardship theory and agency theory in motivation?

Stewardship theory says managers are driven by intrinsic motives such as achievement and responsibility. Agency theory says managers are driven by self-interest and need incentives and monitoring.

What does empowerment mean in stewardship theory?

It means giving managers authority, autonomy and freedom to decide. The theory holds that trust and empowerment help stewards perform better than tight control.

Does stewardship theory say managers do not need pay?

No. It says non-financial motives are the main drivers. Fair pay is still part of a healthy organisation.