Stewardship theory has its roots in psychology and sociology and was designed for researchers to examine situations in which executives as stewards are motivated to act in the best interests of their principals (Donaldson & Davis, 1989, 1991). In stewardship theory, the model of man is based on a steward whose behavior is ordered such that proorganizational, coUectivistic behaviors have higher utility than individualistic, self:serving behaviors. Given a choice between self-serving behavior and pro-organizational behavior, a steward's behavior will not depart from the interests of his or her organization.

A steward will not substitute or trade self-serving behaviors for cooperative behaviors. Thus, even where the interests of the steward and the principal are not aligned, the steward places higher value on cooperation than defection (terms found in game theory). Because the steward perceives greater utility in cooperative behavior and behaves accordingly, his or her behavior can be considered rational. According to stewardship theory, the behavior of the steward is collective, because the steward seeks to attain the objectives of the organization (e. g. sales growth or profitability). This behavior in turn will benefit principals such as outside owners (through positive effects of profits on dividends and share prices) and also principals who are managerial superordinates, because their objectives are furthered by the steward. Stewardship theorists assume a strong relationship between the success of the organization and the principal's satisfaction. A steward protects and maximizes shareholders' wealth through firm performance, because, by so doing, the steward's utility functions are maximized.

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stewardship theory

Given the potential multiplicity of shareholders' objectives, a steward's behavior can be considered organizationally centered. Stewards in loosely coupled, heterogeneous organizations with competing stakeholders and competing shareholder objectives are motivated to make decisions that they perceive are in the best interests of the group. Even in the most politically charged environment, one can assume that most parties desire a viable, successful enterprise. A steward who successfully improves the performance of the organization generally satisfies most groups, because ost stakeholder groups have interests that are well served by increasing organizational wealth. Therefore, a pro-organizational steward is motivated to maximize organizational performance, thereby satisfying the competing interests of shareholders. This explanation does not imply that stewards do not have necessary "survival" needs. Clearly, the steward must have an income to survive. The difference between the agent and the principal is how these needs are met.

The steward realizes the trade-off between personal needs and organizational objectives and believes that by working toward organizational, collective ends, personal needs are met. Hence, the steward's opportunity set is constrained by the perception that the utility gained from pro-organizational behavior is higher than the utility that can be gained through individualistic, self-serving behavior. Stewards believe their interests are aligned with that of the corporation and its owners. Thus, the steward's interests and utility motivations are directed to organizational rather than personal objectives.

Stewardship theorists argue that the performance of a steward is affected by whether the structural situation in which he or she is located facilitates effective action. If the executive's motivations fit the model of man underlying stewardship theory, empowering governance structures and mechanisms are appropriate. Thus, a steward's autonomy should be deliberately extended to maximize the benefits of a steward, because he or she can be trusted. In this case, the amount of resources that are necessary to guarantee pro-organizational behavior from an individualistic agent (i. . , monitoring and incentive or bonding costs) are diminished, because a steward is motivated to behave in ways that are consistent with organizational objectives. Indeed, control can be potentially counterproductive, because it undermines the pro-organizational behavior of the steward, by lowering his or her motivation (Argyris, 1964). The essential assumption underlying the prescriptions of stewardship theory is that the behaviors of the executive are aligned with the interests of the principals.