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

Which of the following is a key difference in the psychological and situational assumptions between stewardship and agency theories?

Stewardship theory is grounded in psychology and sociology and emphasises trust and intrinsic motivation, whereas agency theory is grounded in economics and assumes self-interested, utility-maximising individuals. Hence agency theory expects goal conflict, while stewardship theory expects alignment of goals.

  1. AStewardship theory rests on psychology and sociology emphasising trust, while agency theory rests on economics emphasising self-interestCorrect
  2. BStewardship theory rests on economics, while agency theory rests on sociology
  3. CBoth rest only on accounting principles
  4. DStewardship theory assumes the principal and agent always have opposing goals

Explanation

Stewardship theory draws on psychology and sociology, viewing managers as trustworthy stewards. Agency theory is rooted in economics and assumes utility-maximising individuals. Option D describes agency theory, not stewardship.

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