The essential problem with the Ring is that it is a tool of unlawful and tyrannical domination. It is a thing designed to exert the will of the wearer over everything else. And as such it must be repudiated and destroyed. But that does not invalidate lawful lordship. As in many things, Tom Bombadil is the key to the riddle. He is the Master, and yet he is not master of everything. Bounded, covenantal lordship is good, even holy. But overreaching, grasping for dominance and thralldom is wicked.

Every man has to wrestle with the temptation to use power wrongfully and the opposite temptation to shirk his duties. Saruman is the grasping tyrant; Theoden is the abdicating dotard. Gandalf sets both of them right, throwing down one and restoring the other to his lawful power.

When Saruman runs the Shire, all the normal liberties of the Hobbits are removed. He is a tyrant. But it is the power and authority of Sam, Merry, and Pippin that sets things right. And then Sam is Mayor, Pippin is the Thain and Merry is Master of Buckland. All are positions of authority and power, bounded by covenantal obligations.