Transparency in Corporate Governance

Indeed , the steward theory proposes that trustworthy and cooperative relationship between principals and stewards are positively correlated with firm performance This has several important implications for management control systems First , trust and cooperation can be enhanced by having effective information sharing mechanisms . Under the stewardship theory information systems are primarily for the principal to share information with and not necessarily to monitor the stewards . Second , arrangements that foster understanding and identification between principals and stewards will increase the degree of trust between them , thereby leading to better film performance p

Stewardship theory differs from agency theory in several key aspects Instead of relying on the premise that managers (agents ) are opportunistic and self-serving , stewardship theory assumes that these managers are trustworthy and cooperative . Instead of emphasizing the need for monitoring and control , stewardship theory directs our attention to trust and relationship-building between principal and stewards . Thus , while agency theory focuses on the independence of different groups (for example , board members , monitoring committee , and management , stewardship theory underlines understanding and identification between them

The relationship between the agent and the principal is formalized in agency theory , which describes the relation between the company 's decision makes the officers , directors , and management and its owners and the issues related to potential conflicts of interest between agents and principals . In a small business , the owners and managers are often the same , so there is no potential conflict of interest between the owners and the decision makers . However , in larger business , there is separation of ownership and decision making , and therefore the owners must entrust directors , officers , and managers with the responsibility to make decisions on behalf

In conclusion , the aim of this was to link transparency to economic growth . A growing level of awareness in both the public and the private sector about the...