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

Which of the following statements about the stewardship model is correct when compared with the agency model?

Stewardship theory favours involvement-oriented, empowering structures built on trust, while agency theory favours control-oriented structures with monitoring and incentives. The reverse statements about role separation and goal conflict are incorrect, since agency theory assumes conflict and favours separation of chairman and CEO.

  1. AStewardship stresses separation of the chairman and CEO roles, while agency theory favours their combination
  2. BStewardship assumes a goal conflict between owners and managers, while agency theory assumes goal alignment
  3. CStewardship favours involvement-oriented, empowering structures, while agency theory favours control-oriented structuresCorrect
  4. DBoth theories assume managers are opportunistic and require equal monitoring

Explanation

Stewardship leads to empowering, trust-based structures, whereas agency theory leads to control and monitoring mechanisms. The first two options reverse the actual positions, and the last wrongly says both assume opportunism.

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