Group III

Daniza Dadios R.
Sharlyn Monte Valerio.
Davon Del Rosario Cardenas.
 AGENCY THEORY
Agency theory defines the relationship between the principals
(shareholders of the company) and agents (directors of the company).
According to this theory, the company's principals hire agents to
perform work. The principals delegate the task of running the business
to the directors or managers, who are agents of shareholders. The
shareholders expect the agents to act and make decisions in the
principal's best interest. On the contrary, the agent does not need to
make decisions in the best interests of the principals. The agent may
succumb to self-interest and opportunistic behavior and fall short of
the principal's expectations. The critical feature of agency theory is
the separation of ownership and control. The theory prescribes that
people or employees are held accountable for their tasks and
responsibilities. Rewards and punishments can be used to correct the
priorities of agents.
Simple Term:
Agency theory is an economic theory that
views the firm as a set of contracts among
self-interested individuals. An agency
relationship is created when a person (the
principal) authorizes another person (the
agent) to act on his or her behalf.
 KEY TAKEAWAYS
Principals rely on agents to execute certain transactions, which results in a
difference in agreement on priorities and methods.
The difference in priorities and interests between agents and principals is
known as the'' principal-agent problem.''
 What Is the Principal-
Agent Problem?
The principal-agent problem is a conflict in priorities
between a person or group and the representative
authorized to act on their behalf. An agent may act in a way
that is contrary to the best interests of the principal. The
principal-agent problem is as varied as the possible roles of
principal and agent. It can occur in any situation in which the
ownership of an asset, or a principal, delegates direct control
over that asset to another party, or agent.

For example, a home buyer may suspect that a realtor is

more interested in a commission than in the buyer's
concerns.
 Stewardship Theory
The steward theory states that a steward protects and maximizes
shareholders' wealth through firm performance. Stewards are company
executives and managers working for the shareholders, protecting and making
profits. The stewards are satisfied and motivated when organizational success is
attained. It stresses the position of employees or executives to act more
autonomously so that the shareholders' returns are maximized. The employees
take ownership of their jobs and work at them diligently.

Simply, the stewardship theory is a theory that managers, left on their own, will
act as responsible stewards of the assets they control, and describes the
existence of a strong relationship between satisfaction and organizational
success.
An example of the
stewardship theory:
Is where a president practices a governing style based on
belief, they have the duty to do whatever is necessary in
national interest, unless prohibited by the Constitution.
Stakeholder Theory
Stakeholder theory incorporated the accountability of
management to a broad range of stakeholders. It states that
managers in organizations have a network of relationships to serve
– this includes the suppliers, employees, and business partners.
The theory focuses on managerial decision-making and the
interests of all stakeholders.
Type of Stakeholders
AS AN EXAMPLE OF HOW STAKEHOLDER
THEORY WORKS:
IMAGINE AN AUTOMOBILE COMPANY THAT HAS RECENTLY GONE
PUBLIC. NATURALLY, THE SHAREHOLDERS WANT TO SEE THEIR STOCK
VALUES RISE, AND THE COMPANY IS EAGER TO PLEASE THOSE
SHAREHOLDERS BECAUSE THEY HAVE INVESTED MONEY INTO THE FIRM.
Thankyou !!!