The agency theory, stewardship theory, sociological theory, and shareholder theory enhance the understanding of corporate governance. The theories explain the management models used to ensure managers and shareholders effectively execute their roles to ensure the organization’s success. Corporate governance theories explain the responsibilities of the board of directors and the roles of shareholders in the governance of organizations.
The theories provide different perspectives on how the board of directors, directors, and shareholders influence the organization’s management. For example, the agency and stewardship theories hold different perspectives on the roles of managers within the organization (Fernando et al., 2018). According to the agency theory, managers act as agents of the organization, while the stewardship theory perceives managers as stewards of the organization.
Managers are expected to pose as stewards or agents in helping companies achieve objectives. Analysis of the agency and stewardship theories provides behavioral, situational, and psychological mechanisms managers use to execute their organizational roles (Fernando et al., 2018). The other theories like stakeholders, sociological, hazard moral, resource dependence, and transaction provide different perspectives of corporate governance based on the roles that managers play in the organizational management process.
It is true that organizations mainly work for their shareholders as their primary interest is providing goods and services to gain profits. These aspects are evident through the roles that managers play in organizations, irrespective of the approach used to examine their relationship with their shareholders. From the corporate governance perspective, the agency and stewardship theories show that managers only ensure that the interests of the shareholders are protected regardless of whether they act as agents or stewards within the organization. Based on such theories, it is evident that managers are responsible for developing strategies to ensure that an organization gains more returns to the shareholders.
Reference
Fernando, A. C., Muraleedharan, K. P., & Satheesh, E. K. (2018). Corporate governance: principles, policies and practices (4th ed.). Pearson.