Oliver Balch tackles key topics in academic thinking and research on sustainability
When senior leaders in Singapore’s investment management industry met last month for their annual conference the overarching theme wasn’t stability or security, as one might reasonably expect given the geopolitical situation. Instead, the audience sat down to discussions on stewardship – pitched, as the recently launched Singapore Stewardship Principles (pdf) put it, as a counterweight to the “prevalent short-term view of investment”.
The business literature appears reluctant to define stewardship precisely. Indeed, it’s one of those terms that almost seems easier to understand by its obverse. Enter agency theory. Tightly bound to economics-based paradigms, agency theorists will tell you that humans are rational actors bent on pursuing their self-interest. Stewards, in contrast, believe greater long-term benefit can be derived from “other-focused prosocial behaviour”, to quote organisational behaviour expert Morela Hernandez.
At an individual level, stewardship involves business decision-makers putting the interests of others (including the environment) ahead of their own. Unlike altruism, however, the payback – in terms of future utility for the company and its owners – are explicit to (although not the essence of) stewardship thinking. Japanese managerial culture, which promotes collectivist norms such as flat, decentralised and team-based systems, is conducive to the development of such stewardship relationships.
Stakeholder theory is a close relative to stewardship. A recent paper in the Journal for Business Ethics argues that the key difference is that stewardship essentially takes a normative view of social relations and environmental care compared to the more instrumental perspective adopted by stakeholder theory. That’s to say, the latter calls on companies to take note of parties who affect, or are affected by, corporate activities in order to mitigate potential risks to their profitability. Stewardship theory, in contrast, adopts a “covenantal” approach, where companies have a moral commitment to protect and respect wider society and the environment, separate from their fiduciary obligations. Some scholars have suggested that notions of stewardship be incorporated into stakeholder theory to bolster its ethical basis.
Considerable scholarly attention has gone into how stewardship can be integrated into corporate governance. The ideal is that management practices, policies, procedures and so forth collectively encourage individual employees to act as stewards, thus enacting their employer’s commitment to the same. At a broad level, organisations that are able to free people up (by promoting autonomy and responsibility) are judged to be more likely to succeed than those that restrict or control their staff (as agency theorists would advise). In a true stewardship-led company, there would be no conflict of interest between managers and the shareholders. As Kojo Menyah puts it: “The interests of the two parties are aligned toward the achievement of the objective of shareholders and other stakeholders.”
Leadership studies in particular have focused on the positive role that attributes such empathy, long-term vision and spiritual meaningfulness can offer. Not only would steward-like leaders avoid self-defeating short-term decisions that inflate market value, but – as Cam Caldwell et al argue – they would seek to honour “transformational obligations that create new opportunities and reframe traditional command-and-control notions of leadership”.
Stewardship enters the CSR lexicon in more specific ways, as well. A case in point is the notion of "product stewardship", which rests on two core principles. The first is lifecycle thinking; namely, the idea that a product has potential social, ethical and environmental impacts that need to be managed from inception through to disposal. The second is around shared responsibility – ie it falls to producers, consumers and others to help a company manage these potential impacts, not just the company by itself. So a farmer needs to be mindful of chemical use when growing ingredients for a pie manufacturer, say, while a shopper has to consider what best to do with that pie’s packaging after purchase.
Environmental stewardship has become a staple of the CSR vernacular too. The idea of mankind caring for the natural environment has roots in the Bible, with the Christian creator God naming man as steward of his creation (Genesis 1:28). That same dynamic of protecting the Earth is retained in the contemporary use of the term, although with accountability now directed to future generations. Each generation is morally obliged to pass on that which has been entrusted to them in the same, or better, state as they found it – a point often cast in terms of intergenerational equity. Companies often evoke similar language, although their willingness to act is bounded by their dual obligation not to jeopardise the interests of their investors.
Stewardship theory has excelled in characterising the individual motivations of managers. The fact that this stand at odds with agency theory, which dominates modern neoliberal capitalist thinking, raises questions as to its applicability. More empirical research to show how stewardship thinking can feed into instrumental ends (ie bottom-line profitability) would certainly aid its advancement in day-to-day business strategy and governance.
Balakrishnan, Jaydeep, Malhotra, Ayesha & Loren Falkenberg 2017. Multi-Level Corporate Responsibility: A Comparison of Gandhi’s Trusteeship with Stakeholder and Stewardship Frameworks. Journal of Business Ethics, 141 (1): 133-150.
Caldwell, Cam, Hayes, Linda, Karri, Ranjan & Patricia Bernal. 2008. Ethical stewardship – implications for leadership and trust. Journal of Business Ethics, 78, 153–164.
Hernandez, Morela. 2012. Towards an Understanding of the Psychology of Stewardship. Academy of Management Review, 37 (2): 172–193.
Lewis, Helen. 2016. Product Stewardship in Action: The Business Case for Lifecycle Thinking. Shipley, UK: Greenleaf Publishing.
Menyah, Kojo. 2013. Stewardship Theory. In Encyclopedia of Corporate Social Responsibility. Eds. Samuel O Idowu, Nicholas Capaldi, Liangrong Zu & Ananda Das Gupta. pp 2322-2328.