ACCA Strategic Professional · Strategic Business Leader · Agency

Bellmore Ltd's board argues that its managers are motivated by a desire to do a good job and be trusted, and that heavy monitoring and share option schemes would damage morale. Which theoretical view are the directors adopting?

The directors are applying stewardship theory. It assumes managers are intrinsically motivated and act in the owners' interests, so monitoring and incentive schemes are unnecessary and may harm morale, which contrasts with agency theory's assumption of opportunism.

1. AStewardship theory, which assumes managers are intrinsically motivated to act in the owners' interestsCorrect
2. BTransaction cost theory, which assumes managers always seek to minimise contracting costs
3. CAgency theory, which assumes managers are opportunistic and need incentives
4. DStakeholder theory in its instrumental form, which assumes managers serve only customers