Agency Theory vs Stewardship Theory
Organizational management should follow a strict laid down procedures and high level of professionalism. As a manager in a top organizational structure, high performance is required for the continued sustained success of a business entity. And for this may also call for measures of regular changes of management to avoid cases of complacency. Regular organizational changes are necessary for the positive progress of an organization. It injects new ideas and brings in new energy which boosts the general morale within the working environment. The overstaying on management positions often results in a deep in performance of most managers as they sometimes lose their managerial spark (IAAP n.d.).
Cooption may as well be among the board members who have overstayed on their positions. It refers to the situation whereby, a board member is forcefully reallocated to a new role within the organization to create a new space for new board members. From the article, the changes are seemingly being undertaken to tackle the several scandals in regard to money laundering. Such moments calls for immediate changes in management, and the organization has the right to change its board members often, to avoid occurrences of unwanted image-damaging scandals. It is important to understand that, while some individuals in management may have a certain goal in terms of leaving reputable legacy after some duration; some will only take up roles for their own selfish personal interests (Havard Longwood n.d.).
The Agency theory and the Stewardship theory have been best used to explain these organizational management dynamics, behavioral perspectives management and further clarity on organizational influences that results from the management activities. While both of the theories address management dynamics, they slightly differ in their approach to management and elaboration they give in management activities (Mdison 2014).
The Agency theory focuses primarily on relationships between the two important parties, and that is the owner referred to as the principal in this case, and the agent. This theory analyses relationships from a behavioral point of view as well as the structural point of view. In this study, it is suggested that, in association between the principal and the agent; the latter will always act in a way that addresses only his self interest, a situation that may differ from the principal’s own interest. As such, the principal would devise regulatory measures to keep the agent’s behavior in check and hence making agent align to the organization’s interests (Nyberg et al. 2010).
Gender Quotas and Board Diversity through Norway’s Example
The Agency theory pinpoints the management woes that may arise as a result of continued overstaying by the managers in a managerial position. A manager with self-interests will most likely be complacence and most likely to create rules and regulations that can only advance his/her self-interests while trying to block every sign of threats to their positions. The agency theory’s outcome is mostly concentrated on the high desired results at a lower cost as possible. The theory suggests that, the agency problems are created when the ownership and management of an organization are separated from one another (Lubatkin, Ling & Schulze 2007).
On the other hand, the Stewardship theory primarily deals with the employment relationship between the principal (owner) and the steward. The theory also employs behavioral and structural perspective in the examining the relationships of its tenets. The stewardship theory suggests that the steward and the principal enjoy a warm association and that the steward acts in a manner that advances the interests of the principal. This relationship is guided by the principle of equality between the principal and the steward, and is ideal for a harmonized organizational ideals and the environment. The stewardship theory proposes a better scenario for maximum organizational performance and profitability. Both parties work for the interests of the principal towards the same goal.(Pearson & Marler 2011).
The only way to improve board diversity is by imposing quotas as it happens in Norway. Board diversity is in corporate boards has for long remained a very pertinent issue in modern day corporate world. The equality for women alongside their male counterparts in important boardroom positions has long elicited different views from different individuals. While many will agree with the fact the female representation in bigger position ought to be reviewed and improved; others disagrees with the fact that male members are being scarified at the expense of their female counterparts. Probably, fair grounds for attaining such positions could be a better solution however, regardless of the situation, men always seems to outshines women to these positions even in a fair competition (Corkery & Taylor 2012).
And for that reason, some countries have decided to look for measures of addressing the issue gender diversity within bigger corporate positions. Norway is such a good example whereby there was the imposition of quotas whereby, a certain number of specific positions in the boardroom exclusively belonged to women. While as much as the most businesses hate to hear the government having to tell them what to do in terms of imposing quotas to address gender inequalities in boardrooms, it seems to be a great strategy in addressing that is effectively working for the better results (Stary n.d.).
Resource Dependence Theory
Norway was the first country in 2003 to introduce quotas in favour of the women, whereby all the public companies were required to have at least 40% of boardroom seat slots reserved for women or risk being dissolved. The move has seemingly worked and other European countries such as Spain, Iceland and France have followed with target of 40% while Germany became one of the largest economies in Europe to impose a 30% board seats for women (Izquierdo, Huse & Moltner 2016).
The gender quota maybe one of the most reliable ways of addressing the women absence from big managerial positions, but it is to certain extent a forceful rule that not all the stakeholders within the management would welcome with both hands. The organizational stakeholders believe in what satisfies their expectations and while the issue of the gender quota may address the gender inequalities, it does not guarantee the output expectation from the stated slots of women positions within the boardroom. Now, it comes down to the stakeholders to have a scrutinized criteria of arriving at the best female candidates that fully deserves the boardroom position as required in the gender quota (Arnórsdóttir 2012).
As stated in the Resource Dependence Theory, the firms understand the inevitable external influences on organizational behavior and patterns, although, the manager can work harder to reduce the uncertainties of the external environment. The resource dependence theory outlines the limited power the organization may have in regards to external legal environment and regulations of operation. The gender quota regulation for instance in Norway came from the government, in this case, an external factor that is beyond the organization’s control. The organizations had the responsibility to adhere to these regulations as a way of minimizing the uncertainties that could accompany the failure to do so (Hillman, Withers & Collins 2009).
Furthermore, the Stakeholder Theory, a management theory that connects ethics and strategy in trying to evaluate the true meaning of “value”; clarifies that firms have stakeholders and should closely pay consideration to them. The Stakeholders theory avails the perspective for considering the value that stakeholders seek and also creating ways of measuring that particular value. In regards to the boardroom diversity and the gender quota factor, the theory outlines that any organization which seeks to diligently serve the interests of the broader group of stakeholders will create systematic increased value gradually (Jeffrey & Wicks 2013).
Trade unions and trade activism has served a significant role in trying to transform the global labour situations. Most governments across the world have put in place the regulatory criteria of employee-employer association, with clearly defined rights of an employee and the benefits the employer should grant to their employees. However, all these rights and benefits are not always monitored by the governments and the regulatory bodies and that is where the activists and trade unions come in to safeguard the interests of the voiceless employees from the oppression of their employers. In many circumstances, the governments as the major employers for their citizens have also oppressed their own citizens through lower wages and unrealistic terms of work. Therefore, the role of activists and trade unions is inevitable (Kunze, Böhm & Bruch 2011).
Stakeholder Theory
The protection of human rights is entitled to every employee regardless of his/her position in within an organization. The human rights for the employees at the job market are also emphasized in the Principles 2 and 5 of the United Nations Global Compact. Organizations and business have a responsibility of respecting the human rights as provides in global human rights laws. Many business enterprises have been complacent in addressing to the rights of their employees in a number of ways including poor wage bills, poor working conditions, and poor pension’s schemes among others. Given the fact that most organization’s goals is to make profits, sometimes, in this process the sacrificial lambs are the employees.
The law provides for the advocating for human rights protection through activism, trade union representation and even personal representation if possible. Creating these avenues for activists and the trade unionists provides a positive pressure to the involved firms and creates avenues for the improvement of the terms of service by the firm towards its employees and their rightly deserved interests that they are entitled to within the set up.
For instance, in the Stakeholder Theory, the elements of ethics and strategy are emphasized in explanation and the interpretation of the theory. It is directly related to the employee relationship with his/her organization. The Stakeholders theory has infiltrated through many disciplines and professions including law, the public policy among others. The theory empathizes on creating values for stakeholders. In an organizational domain, the terminology “stakeholder” involves all the factors that enable the operation of the business, including the employees.
Therefore, the employees in very many situations are considered as part of organizational stakeholders. And as much as the theory’s measurement of value has received very little attention; its insistence on the shareholder value is invaluable. The organizations have a sole responsibility of supporting their employee and respecting their rights, as part of their esteemed shareholders. Trade unions and activists are also considered as those external shareholders that have a degree of impact on organizational decisions.
In comparison to the Stakeholder theory, the Stewardship theory illustrates the common association between the Principal and the Steward, such that, just like the steward in this theory; the employee works very hard for the interests of the employer, and they both work to achieve the same goal, that is, the maximizing the profit for the company.
The mutual relationship between the employee and the employer should create a harmonized environment towards a mutual goal for the organization, and while the organization may be the greatest beneficiary of the two, all the factors and situations points out that the business should also reward the “steward” by offering better working terms and protecting their human rights without having to take other extra measures of trade activism (Chirico, Ireland & Sirmon 2011).
References
Arnórsdóttir, ER 2012, ‘Gender Quotas on Corporate Boards in Iceland: Attitudes within the Icelandic business community’, MSc Thesis: Compenhagen Business School.
Chirico, F, Ireland, RD & Sirmon, DG 2011, ‘ Franchising and the family firm: Creating unique sources of advantage through “Familiness”’, Entrepreneurship Theory and Practice, pp. 483-501.
Corkery, JF & Taylor, M 2012, ‘The gender gap: A quota for women on the board’, Corporate Governace eJournal, pp. 2-12.
Havard Longwood n.d., ‘Performance Management: Planning & Goal Setting’, Office of Human Resources, pp. 2-31.
Hillman, AJ, Withers, MC & Collins, BJ 2009, ‘Resource Dependence Theory: A Review’, Journal of Management, vol VI, no. 35, pp. 1404 –1427.
IAAP n.d., ‘Organizational Management’, IAAP CAP Organizational Management Specialty Certificate , pp. 2-6.
Izquierdo, M, Huse, M & Moltner, H 2016, ‘Value creating boards and gender diversity: Suggestions to progress in getting women on boards in Spain’, Research Report: BI Norwegian Business School.
Jeffrey, HS & Wicks, CA 2013, ‘Stakeholder Theory, Value, and Firm Performance’, Business Ethics Quarterly , pp. 97-124.
Kunze, F, Böhm, SA & Bruch, H 2011, ‘Age diversity, age discrimination climate and performance consequences—a cross organizational study’, Journal of Organizational Behavior, pp. 264-290.
Lubatkin, MH, Ling, Y & Schulze, WS 2007, ‘ An organizational justice-based view of self-control and agency costs in family firms.’, Journal of Management Studies, vol VI, no. 44, pp. 955-971.
Mdison, JK 2014, ‘Agency Theory and Stewardship Theory Integrated, Expanded, and Bounded by Context: An Empirical Investigation of Structure, Behavior, and Performance within Family Firms’, PhD diss University of Tennessee, Knoxville.
Nyberg, AJ, Fulmer, IS, Gerhart, B & Carpenter, MA 2010, ‘Agency theory revisited: CEO return and shareholder interest alignment’, Academy of Management Journal, vol VI, no. 53, pp. 1029-1049.
Pearson, AW & Marler, LE 2011, ‘A leadership perspective of reciprocal stewardship in family firms’, Entrepreneurship Theory and Practice, vol VII, no. 34, pp. 1117-1124.
Stary, K n.d., ‘Gender Diversity Quotas On Australian Borads: Is It In The Best Interests Of The Company?’.
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