CMA Foundation · Fundamentals of Business Economics and Management · Stewardship Theory and Agency Theory of Management
Meera Textiles Ltd gives its plant managers wide autonomy, trusts them with decisions, and spends little on supervision, believing they will work for the firm's long-term good. Which approach to managerial control does this reflect?
This reflects the involvement-oriented, trust-based control of stewardship theory. Giving managers autonomy with minimal supervision assumes they will act for the firm's long-term good. Heavy monitoring, bonding costs and incentive contracts to reduce agency costs belong to agency theory.
- AInvolvement-oriented and trust-based control typical of stewardship theoryCorrect
- BControl based on heavy monitoring and bonding costs
- CControl through the threat of takeover
- DControl aimed at reducing agency costs through incentive contracts
Explanation
Autonomy, trust and low supervision reflect an involvement-oriented, empowering structure, which stewardship theory prescribes. Heavy monitoring and incentive contracts to reduce agency costs are agency-theory features.
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