The paper 'Use of Stewardship Theory to Appoint and Retain Directors" is a great example of a business assignment. Under the agency theory, an agency relationship exists between the directors and the shareholders. According to Bonazzi & Islam (2007), in a corporation, the shareholders are the principal while the managers are the agents. About this, the shareholders delegate the authority to the directors where they act to the best of their interests to ensure that the wealth of the shareholders grows. However, some of the managers who are given the authority to manage the wealth of the shareholders act dishonestly and opt to use their positions to steal from the shareholders in fraudulent activities.
Under the agency relationship, the managers’ interests are expected to be in line with those of the shareholders. Contrary to this, some managers are concerned more with their interests rather than concentrating on the benefit of the shareholders to maximise the value of their wealth. Therefore, managers whose interests are found to be in conflict with those of the shareholders should be investigated and if they are found guilty, they are jailed and the funds they misappropriated as a result of conflicting interest be repaid since the shareholders’ interests is to see the value of their wealth grow which might be in conflict with the benefit of the directors. Directors do not lose a lot like the shareholders Under the agency relationship, the shareholders invest their wealth and delegate the authority of management of assets to the leaders who are expected to maximise the value of the shareholders’ value so as to see it grow.
When the directors defraud the companies they are managing; they only lose their job while they remain with their professional skills which they obtained.
However, the principal who is the shareholder, in this case, end up losing a lot of money which they had invested as capital in the enterprise. Additionally, the fraudulent activity is carried out by the agents may drain more than what the principal had invested in the business. Moreover, removing of more wealth from the shareholders may make them bankrupt. Corrupt Directors should be jailed for others to learn a lesson In the case published in a newspaper where the former chairman of the Sydney-based technology firm known as TZ Ltd was jailed for ten years for defrauding the company amount worth almost $9 million.
The director used the money for his means rather that which was expected by the shareholders that the wealth of the business should be used to grow their value. As a result, extorting money from the company and using it for own means drains the pockets of the shareholders who invested in the company with the hope that the value of their wealth will grow.
About the case of Andrew Sigalla who was the Chairmen of the TZ Ltd, the chairman was only using the money for his interests which are not expected by the shareholders. If the chairman was not jailed, other managers could use the same means in the future, but due to what the director was facing, this could have made them learn a life lesson where they may not involve themselves in such activities in the future.
Al-Dajani, H., Bika, Z., Collins, L. and Swail, J. (2014). Gender and family business: new theoretical directions. International Journal of Gender and Entrepreneurship, 6(3), pp.218-230.
Livia Bonazzi, Sardar M.N. Islam, (2007) "Agency theory and corporate governance: A study of the effectiveness of board in their monitoring of the CEO", Journal of Modelling in Management, Vol. 2 Issue: 1, pp.7-23, doi: 10.1108/17465660710733022
Muller-Kahle, M., Wang, L. and Wu, J. (2014). Board structure: an empirical study of firms in Anglo-American governance environments. Managerial Finance, 40(7), pp.681-699.
Young, S. and Thyil, V. (2013). Corporate Social Responsibility and Corporate Governance: Role of Context in International Settings. Journal of Business Ethics, 122(1), pp.1-24.