Theory:

     The king was astonished as well as pleased. ‘He is indeed very wise.’ he thought to himself. ‘I need people like him to work for me.’ And the king appointed this humble shepherd the governor of a small district.
 
     Although he rose to power and dignity, the shepherd remained as humble as ever. People loved and honoured him for his wisdom, sympathy and goodness. He was kind and just to one and all. His fame as a fair and wise governor soon spread throughout the country.
Explanation:
 
When the shepherd addressed the king as 'Majesty', the king was shocked for a while, but he was pleased with the shepherd's intelligence. The king thought to himself about the intelligence of the wise shepherd. He was impressed with the kind, humble, wise qualities of the shepherd. The king wanted people like this wise shepherd to work along with him. So, he appointed the wise shepherd as a Governor of a small district.

The shepherd was rewarded with a governor position due to the good qualities he possesses. Still, his values did not change but remained the same. This new position did not bring any change in his character. Though he gained authority, his humble quality persists inside him. The great qualities he possessed, such as wisdom, sympathy, humility, and goodness, were loved and honoured by all.
 
Additionally, the shepherd had another good quality as well. He treated everyone with equality and did not show any difference among people. Soon his good virtues, especially treating people with equality and helping them with his intelligence, had spread throughout the country.
 
Meaning of difficult words:
  
S.No
Words
Meaning
1.
Astonished
Being surprised about something that you did not expect
2.
Indeed
In reality
3.
Dignity
High rank or position
4.
Sympathy
A natural feeling of pity and kindness for others
Reference:
National Council of Educational Research and Training (2006). The Shepherd's Treasure (pp. 07-10). Published at the Publication Division by the Secretary, National Council of Educational Research and Training, Sri Aurobindo Marg, New Delhi.