Investment Opportunities in the USA and Canada

Stewardship theory stresses psychological and sociological techniques to monitoring rather than the economic tools utilized in agency theory. Davis and Donaldson (1997) believe that members of an organization share a common identity, which fosters trustworthy behavior. Muth and Donaldson (1998) concur that financial gain is not the sole motivator for managerial behavior. They also believe that managers require some degree of discretion in order to efficiently run a corporation in the best interests of shareholders. As a result, the concept of individual ownership is not viewed negatively in stewardship theory, as managers are thought to naturally demonstrate cooperative behaviors (Davis et al., 1997; Donaldson and Davis, 1991). 

These managers are motivated by more than just financial gain (Muth and Donaldson, 1998). 

Fama and Jensen (1983a) observed that internal board member managers are more likely to be present in large businesses than outside directors because they have a better awareness of organizational activities. According to stewardship theory, agents are naturally inclined to prioritize shareholders' interests due to their own reputations and career goals. This naturally reduces agency costs (Donaldson & Davis, 1994). Stewards' impact on firm performance is influenced by a number of socio-cultural and psychological elements. Managers perform better when they are empowered and satisfied with their jobs. Managers (like most employees in a successful firm) frequently consider themselves as the organization's spokespeople in a social setting. They see the authority delegated to them by their superiors as a method of assisting the company and their colleagues in achieving their objectives. From a situational standpoint, managers are supposed to prosper in an environment that promotes involvement. This means that tasks, control, and critical thinking are effortlessly interwoven into a single process. If the corporate culture leans toward collectivism, it will inevitably affect managers' long-term relationships and devotion to the company (Clarke, 2004).

Stewardship theory supports the success of an insider-dominated board by emphasizing their extensive understanding of organizational operations, including data access and technical skills (Muth and Donaldson, 1998). 

Furthermore, combining the responsibilities of CEO and Chairman can result in more constant leadership and control, particularly when it comes to making choices and developing investment strategies. According to Donaldson and Davis (1991), this improves overall effectiveness. When investigating ownership structure mechanisms, agency theory says that providing incentives to agents is critical in aligning their interests with principals. This encourages managers to prioritize the maximizing of shareholder value. As managerial ownership grows, the interests of shareholders and managers become more closely aligned. This alignment diminishes the motivation for opportunistic conduct, hence reducing agency concerns (Jensen, 1993; Jensen and Meckling, 1976). Furthermore, having important and powerful owners helps to address agency issues because they are motivated and capable of closely monitoring management, which benefits everyone involved (Vishny and Shliefer, 1986, 1997). On the other hand, resource reliance and stewardship theories do not propose any testable hypotheses about ownership structure. Thus, agency theory will be the primary guide for the analysis, with resource dependency and stewardship theory examined only if they can be tested and are important to the hypotheses.

In conclusion, agency theory contends that in modern organizations where ownership and control are distinct, agents may not always prioritize the interests of principals. 

To address this conflict of interest, shareholders must use internal corporate governance procedures to monitor management and push them to fulfill their responsibilities of maximizing shareholder value and improving business performance. It is critical to have a system in place to keep an eye on managers and ensure they are performing their duties properly. This can be accomplished through corporate governance procedures that recognize and resolve potential issues, as well as rewarding managers for excellent behavior and performance. Agency costs are the expenses incurred as a result of residual loss, bonding, and monitoring by agents, or managers. Assuming agency costs are in place to prevent managers from prioritizing their own interests over those of shareholders, these expenses serve to alleviate the agency problem, resulting in improved business performance. Inside directors can make better judgments because they have a thorough understanding of the everyday operations of their companies. According to stewardship theory, they are preferred over NEDs due to their superior understanding of corporate performance. With the reduction in the number of inside directors, boards have lost critical information about the company's current situation and progress.