Framework

Agency theory versus stewardship theory

The question it answers

Why monitor managers, and when is monitoring unnecessary?

Origin
Berle and Means (1932); Jensen and Meckling (1976); Shleifer and Vishny (1997); counter-view in Donaldson and Davis (1991)
Diagram type
Comparison table
Level of analysis
Firm
Topics
Ethics & corporate governanceCorporate finance
Clay balance scale with two level glass pans, icon for business ethics

Diagram

Agency theory versus stewardship theory

CriterionAgencyStewardship
View of managerSelf-interestedIntrinsically motivated
Main toolMonitoring, incentives, debtTrust and empowerment
CostMonitoring, bonding, residual lossRisk of misplaced trust

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Berle, A.A. and Means, G.C. (1932) The Modern Corporation and Private Property. New York: Macmillan.No DOISource page
  2. Donaldson, L. and Davis, J.H. (1991) ‘Stewardship theory or agency theory: CEO governance and shareholder returns’, Australian Journal of Management, 16(1), pp. 49–64.doi:10.1177/031289629101600103Source page
  3. Jensen, M.C. and Meckling, W.H. (1976) ‘Theory of the firm: managerial behavior, agency costs and ownership structure’, Journal of Financial Economics, 3(4), pp. 305–360.doi:10.1016/0304-405x(76)90026-xSource page
  4. Shleifer, A. and Vishny, R.W. (1997) ‘A survey of corporate governance’, Journal of Finance, 52(2), pp. 737–783.doi:10.1111/j.1540-6261.1997.tb04820.xSource page