This theory proposes that managers are considered good stewards who will act in the best interest of the owners (Donaldson & Davis 1991). The fundamentals of this theory are derived from social psychology, which focuses on the behavior of executives. It says that the steward’s behavior is pro-organization and collectivists.
The steward’s behavior is not expected to depart acting in the interests of the organization because the steward is believed to strive to attain the objectives of the organization. Stewards also try to even out differences between different stakeholders and other interest groups. Stewardship theory sees a strong relationship between managers and the success of the firm, and therefore the stewards protect and maximize shareholder wealth through firm performance.
Since the focus of stewardship theory is on organizational structures which facilitate and empower rather than monitor and control, this theory supports appointment of a single person for the position of chairman and CEO and a majority of specialist executive directors rather than non-executive directors (Clarke 2004).
1.8.5 Social Contract Theory.
This theory perceives society as a series of social contracts between members of society and society itself (Gray, Owen& Adams 1996). An integrated social contract theory refers to macro social and micro social contracts. The former refers to the communities and the expectations from the organization to provide support to the local community, and the latter refers to a specific form of involvement.