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Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns


  • Lex Donaldson

    (Australian Graduate School of Management, University of New South Wales, PO Box 1, Kensington NSW 2033.)

  • James H. Davis

    (for Merly Department of Management and Organization College of Business Administration, University of Iowa; Presently Department of Management, College of Business Administration, University of Notre Dame, Notre Dame, Indiana 46556, U.S.A.)


Agency theory argues that shareholder interests require protection by separation of incumbency of rôles of board chair and CEO. Stewardship theory argues shareholder interests are maximised by shared incumbency of these rôles. Results of an empirical test fail to support agency theory and provide some support for stewardship theory.

Suggested Citation

  • Lex Donaldson & James H. Davis, 1991. "Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns," Australian Journal of Management, Australian School of Business, vol. 16(1), pages 49-64, June.
  • Handle: RePEc:sae:ausman:v:16:y:1991:i:1:p:49-64
    DOI: 10.1177/031289629101600103

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    References listed on IDEAS

    1. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October.
    2. Dan R Dalton & Idalene F Kesner, 1987. "Composition and CEO Duality in Boards of Directors: An International Perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 18(3), pages 33-42, September.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Kesner, Idalene F. & Dalton, Dan R., 1986. "Boards of directors and the checks and (Im)balances of corporate governance," Business Horizons, Elsevier, vol. 29(5), pages 17-23.
    5. Vance, Stanley C., 1978. "Corporate governance: Assessing corporate performance by boardroom attributes," Journal of Business Research, Elsevier, vol. 6(3), pages 203-220, August.
    6. Stigler, George J & Friedland, Claire, 1983. "The Literature of Economics: The Case of Berle and Means," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 237-268, June.
    7. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    8. Paula L. Rechner & Dan R. Dalton, 1991. "CEO duality and organizational performance: A longitudinal analysis," Strategic Management Journal, Wiley Blackwell, vol. 12(2), pages 155-160, February.
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