Stewardship theory and

firm conformance

Features
Managers --- Stewards
Identification --- High Value Commitment
The Model of Man --- Collectivistic, Pro-organizational and Trustworthy
Managers Motivated --- Principal Objective, Growth, Achievement and

Self-actualization
Manager-principal Interest --- Convergence
Structures --- Facilitate and Empower
Owners Attitude --- Risk-propensity
Principal-manager Relationship --- Trust

Comparison
Theories on Relationship between Directors' functions
and Corporate Performance (stewardship theory---agent
theory)
Stewardship

Agent

Psychology & Sociology

Empower CEO and managers to
perform their best

Economics & Finance

Monitor CEO and managers to
ensure their efficiency

Dominant Function of
Directors

Empowering:
Enable governance structures for
maximum potential of CEO and
managers

Monitoring:
Choose CEO
reward CEO
Evaluate CEO and company
performance

Performance Criteria

Return on assets, return on

equity, earnings per share

Profit, return on investment,

stock price, earnings per share

Limitation

Too "idealistic" about the

behavior of managers

Too "harsh" about the

behavior of managers

Foundation of Theory

FIRM PERFORMANCE

Stewardship theory focuses on empowering

structure => CEO duality.

Advantages:
providing an efficient leadership
preventing a potential rivalry
preventing the confusion
encouraging entrepreneurship and innovation

Disadvantage: Idealizing managers behavior

FIRM PERFORMANCE

Result of stewardship management

Better human resource practice

Fewer downsizing events

Greater investment in R&D
Less risky strategic investments
Long-term value, long-term supplier network,
customers loyalty.
(Miller and LeBreton-Miller 2006)

FIRM PERFORMANCE
Dawn Harris and Constance Helfat (1998): Neither

independent chairmanship nor CEO duality can be

described as governance practices that certainly
improve operating performance.
Nicholson, Gavin J. and Kiel, Geoffrey C. (2007): After

2002, there is a positive relationship between

independence and operating performance.
Sekhar Muni Amba (2014): CEO-duality has a

negative impact on ROA

FIRM PERFORMANCE
Lex Donaldson and James H. David (1991): ROE

returns to shareholders are improved by combining

the role-holders of the chair and CEO positions.
Jenny Tian and Chung-Ming Lau (2001): CEO duality

had positive linear relationship with organizational

performance in terms of both operation efficiency
(ROA and ROE) and financial strength (shareholders
right ratio)
Tina Yang and Shan Zhao (2011): The relation between

board leadership structure and firm performance is

mixed