This is a little trickier to grasp than Theory No. 1 but here goes!
In order to be successful you need to be able to cope with a greater level of ambiguity. That is not to say that you aren't clear or direct and to the point with your direct reports; rather that you need to be able to sleep at night knowing that the way that you think the business you own is being conducted may not be quite right.
Take the example of a supervisor. As the name suggests they supervise. It is not difficult to see that they have very close control over their reports on the basis that they are close to watching almost every move they make (something they will probably do until they are confident the report is doing it correctly.
Compare this to the example of a Chief Executive Officer (CEO). They spend most of their time in meetings or City Offices and most rarely get to see what is actually happening at the coal face. (That is not a criticism - the share holders would be concerned if they supervised the workers personally!). They entrust (or empower) their reports to control how the work gets done.
As organisations get bigger, the gap between who actually does the work and who is the one "at the top" being considered to be successful becomes larger. With this gap comes a whole combination of empowerment entrusting and chinese whispers and interpretation and translation etc. This relinquishing of the controls means that there will naturally be ambiguity between how the CEO thinks business gets done and how it actually gets done.
Recently there has been a series of "backt to the floor" type programmes. The ones where a CEO or MD has returned to the coal face of their company to see how work actually gets done. Fortunately the disguises used have been convincing and they have not suffered from the "let's show them how what we think they would like to see" routine. Instead the ambiguity between what they thought happened and what actually happens has been revealed.
The challenge, therefore, is for a CEO to stay close enough to the coal face to see what happens but far enough away that they don't get their hands dirty. Or is it?