Positive Corporate Stewardship in Action Corporate

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Economic Motivation:The Principal and Agent Relationship from a Stewardship PerspectiveThe principal-agent relationship is when a principal (such as investors, who function as owners of an organization) allows an agent to make decisions on behalf of the agent and to exercise a certain degree of agreed-upon control (Principal-agent, 2021). Problems occur when there is a conflict between the economic interests of the agent and those of the principal. One of the most critical issues is the fact that the principal keeps the assets and the financial risk, and bears the burden of the losses, even when an agent makes a mistake (Principal-agent, 2021).In theory, a principal can use discretion in selecting an optimal agent, and fire the agent in the event of impropriety. The risk of the agent making poor decisions is called agency costs (Principal-agent, 2021). This may be manageable with, say, a real estate agent not upholding the interests of a client during a house sale. But shareholders in a company often have relatively small percentages of interest in the company and are at the mercy of the agent’s superior knowledge and power to make excellent decisions.To reduce agency costs, there are often specific controls written into the contracts of CEOs and other types of corporate agents, to ensure they behave to optimize the financial health of the firm and protect shareholder interests with the same care as if they were their own. For example,…

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…are more apt to be wiling to work for a company which shows good stewardship towards its workers in the form of fair salaries, pay, and promotional possibilities.

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As companies grow larger and more powerful, the extent of their influence will likely be placed under greater regulatory and media scrutiny.Additionally, their ability to affect people’s lives will likewise expand, including being able to influence people’s lives for the better in the form of innovative products the promote better health and communication. If leaders use the potential inherent in the agent relationship to maximize the benefits of globalization, there will be less resistance to it in the long run and more willingness to allow companies to profit from it to the….....

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