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

A company says its managers are trusted custodians who value achievement and recognition, so it relies on a collaborative culture and minimal control. Which view of human behaviour does this reflect?

This reflects stewardship theory, which sees the manager as a self-actualising, pro-organisational custodian motivated by achievement and recognition, so trust and collaboration work better than tight control. Agency theory views the manager as an economic, self-serving individual and therefore stresses monitoring and incentives.

  1. AAgency theory, because the manager is an economic, self-serving individual
  2. BStewardship theory, because the manager is a self-actualising, pro-organisational individualCorrect
  3. CAgency theory, because trust reduces agency costs to zero
  4. DStewardship theory, because owners must closely monitor stewards

Explanation

Stewardship theory draws on psychology and sociology, seeing managers as motivated by growth, achievement and responsibility, so trust and low control suit it. Agency theory uses an economic, self-serving model and would prescribe monitoring.

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