CMA Foundation · Fundamentals of Business Economics and Management · Stewardship Theory and Agency Theory of Management
Which of the following is a commonly cited limitation of stewardship theory?
A key limitation of stewardship theory is that its optimistic assumption of trustworthy managers may be unrealistic when managers' interests diverge from owners'. Where trust is misplaced and controls are weak, the organisation is exposed to misuse of authority.
- AIt assumes all managers are self-serving
- BIt ignores the role of intrinsic motivation
- CIt may be unrealistic where managers' interests actually diverge from the owners' and trust is misplacedCorrect
- DIt requires heavy spending on monitoring
Explanation
Stewardship theory's optimistic assumption of trustworthy managers can fail if some managers pursue self-interest, leaving the firm exposed due to weak controls. The other options describe agency theory's assumptions or contradict stewardship's emphasis.
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