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Chapter 3

Stewardship

Stewardship is the responsibility to take good care of resources. A
steward is a person entrusted with management of another person’s
property, for example, when one person is paid to look after another
person’s house while the owner goes abroad on holiday. The steward is
accountable for the way he carries out his role.

This relationship, where one person has a duty of care towards
someone else is known as a ‘fiduciary relationship’.

A fiduciary relationship is a relationship of ‘good faith’ such as that
between the directors of a company and the shareholders of the
company. There is a ‘separation of ownership and control’ in the sense
that the shareholders own the company, while the directors make the
decisions. The directors must make their decisions in the interests of
the shareholders rather than in their own selfish personal interests.

In essence the directors are stewards of the company.

Resource-dependency theory

Resource-dependency theory is the study of how the external resources
of organisations affect the behaviour of the organisation. The theory
was formalised by Jeffrey Pfeffer and Gerald Salancik in 1978.

The ideology of resource dependence theory can be summarized as
follows:

 Organisations depend on resources.

 These resources ultimately originate from an organisation's
environment.

 The environment, to a considerable extent, contains other
organisations.

 The resources one organisation needs are thus often in the hands
of other organisations.

 Resources are a basis of power.

 Legally independent organisations can therefore depend on each
other.

In the context of corporate governance, directors are responsible for
developing appropriate strategies to exploit these resources in order to
ensure the survival of their own organisation.

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