When Agents Become Stewards: Introducing Learning in the Stewardship Theory

Abstract

Stewardship Theory, developed by Donaldson and Davis (1991 & 1993) is a new perspective to understand the existing relationships between ownership and management of the company. This theory arises as an important counterweight to Agency Theory. Though this theory addresses some of the reductionist assumptions of Agency Theory, it suffers from being static as it considers the relationship of principal agent at a single point in time and assumes no learning of individuals as a result of their interactions. This paper brings dynamics into the picture by introducing the learning that occurs within each agent every time they interact. It is argued that individuals learn in the process of interaction and can change their preferences; not necessarily feel betrayed and frustrated. The decision-making theory of P¿rez-L¿pez (1991 & 1993) gives foundations to the arguments proposed in the paper.

Keywords: Stewardship theory; Agency theory; Decision making