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History Of The Stewardship Theory Accounting Essay

The stewardship theory holds a different approach from that of the agency theory, it first premise is that, the company serves a large range of social purposes rather than just trying to maximize the wealth of shareholders. The stewardship theory also called the stakeholders theory assumes that corporations are social entities that affect stakeholders welfare and stakeholders are individuals interacting with the firms directly, therefore, they can affect or affected by the achievement of the firm’s objectives(Donaldson and preston,1995, freeman,1984)
According to Starik and Rands(1995), a company’s success can be judge by its ability to add stakeholders value(starik and rands,1995,Dunphy et al,2003).stakeholders will only return to a firm for more when they always get what they wantFreeman,1984, freeman and Mc Vea,2001).Hence stakeholders are regarded as instrumental to corporate success and they tend to possess some moral and legal rights(Donaldson and Preston,1995, Ulrich,2008).Companies management have to take in to consideration the claims or concern of stakeholders in their decision making process(Blair, 1995), stakeholders participation in the company’s decision making process enhance better efficiency (Turnbull,1994) and also reduces conflicts(Rothman and friedman, 2001).
A company can use two approaches when considering or integration stakeholders in their decision making (kaptein and van Tulder,2003). These two approaches are reactive and proactive approach. Reactive approach on one hand is when the concern of stakeholders are not considered or integrated in making corporate decision. This usually leads to misalignment of the company’s objectives and the demands of stakeholders (Mackenzie,2007).The scandals of world com was attributed to the fact that they never integrated the stakeholder concern in their decision making processes(Curral and Epstem,2003, Turnbull,2002, walkins,2003 and Zandstra,2002) .In respond to these scandals, some regulations were set up by governments with the aim of aligning stakeholders interest with corporate objectives. For instance, the Sarbanes-Oxley Act. On the other hand, the proactive approach is when companies integrate the concern of stakeholders in their corporate decision making process, thus establishes a good corporate governance structure( de wit et al, 2006).
3.5 Summary of the theories.
The knowledge of agency theory can be credited to Coase (1937) however the ideas of this theory was practical only to directors and boards since the 1980’s.Following . agency theory, individuals are self-interested and not altruistic, therefore individuals can never be trusted to always act in others best interest. On the other hand,, individuals will always want to maximize their utilities functions, the agency theory considered managers and shareholders relationship as a contract ( Adams, 2002). This means that managers actions must be properly monitored to guarantee that they always act in shareholders’ best interest.
The stewardship theory on its part opted that company’s board of directors and their CEO, acting as stewards, are encouraged to act in the company’s best interests and not trying to satisfy their selfish interests. This is partly because, previously senior executives regarded companies as an extension of themselves (Clarke, 2004; Wheelen

The oil and gas industry

INTRODUCTION
The oil and gas industry is essential to survival of the economy for different purposes. The industry provides energy and chemicals to the economy vital for transport, companies and household in U.K. Through the industry the government earn valuable and substantial tax and export revenue to support the economy. The figure below tells it own tale:
v Three quarters of the UK’s primary energy.
v Employment for more than 380,000 people.
v Has invested £ 150 billion over the last 25 years.
v Has paid £ 150 billion in taxes since the 1970s.
v Adds £4 billion a year to balance of payments.
v Accounts for one-fifth of UK annual investment. (oilcareers.com)
This primary aim of this report is to consider key environmental factors that are currently affecting the industry. This will be done through PEST (Political, Environmental, Social and Technological) analysis. This report will also take into consideration rationale of industry and companies chosen for this project, in addition a number of financial ratios will be considered to determine the performance of the companies in the industry. This will help in establishing where each company stands in relation to their competitors; as well allowing the strongest and weakest companies to be determined.
RATIONALE FOR INDUSTRY
This Oil and Gas industry contribute significantly to the economy. The rationale based on this industry choice is to gain an insight to how prepared companies are regarding the risk posed by climate change. According to a report by Palma (200*) she explored increasing pressure in the Oil and Gas industry face from climate change. She indentified such risk as:
Damage to corporate reputation: As the understanding and awareness of the damages posed by climate changes increases and develops, failure to observe and account for the impact of climate change on social and environmental resources is progressively likely to damage company’s status and reputation.
Increasing pressure on water resources: There are growing concerns regarding changes in rainfall patterns. This has led to water shortages, poor water quality and drought and flooding has significantly increased the demand for water. For companies that rely heavily on water, increase competition for available resources could create operational problems for companies.
Drop in value of financial assets: In order to meet the economy increasing demand for energy, oil and gas companies need to secure further investment for exploration, production, and manufacturing. Shareholders are placing more and more importance on the business impacts of the change, as risk impact cost and revenue drivers. It is probable that insurance cost could rise due to greater chance of physical plant damage because of weather events.
Dealing with such risk is not as easy as it may sound, some companies profit may decline due to the necessary changes in order to combat climate change. It will take a collective effort as well as individual effort for the industry to maintain its status as one of Britain’s strongest industry.
RATIONALE FOR COMPANY CHOICES
The diagram below shows that the companies are similar in size, employees employed and turnover. This makes is easier for comparability purposes in finding out how each company are performing. In addition all companies chosen are in the FTSE 350.
JKX Oil and Gas
JKX Oil and Gas plc principle activity is developing and producing oil and gas reserve, which is conducted through there subsidiary undertakings. JKX main principle interests are located in Ukraine and in Russia, with further interest in Georgia, Bulgaria and United States. As of December 31, 2008, the Company drilled two exploration wells. As of December 31, 2008, the Company acquired 25% interest in the Svidnik, Medzilaborce and Snina from Aurelian Oil

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