Managerial discretion in corporate governance

What is it about?

Purpose – This article assesses the concept of managerial discretion with respect to its theoretical and empirical usefulness for corporate governance research. Design/methodology/approach – This article scrutinises applied theoretical claims, definitions and methods as well as a number of empirical studies on managerial discretion. Findings - To date, neither has an empirical definition of the concept been presented nor has a measurement been developed and tested for reliability and validity that contains all three factors of the managerial discretion concept as proposed by Hambrick and Finkelstein (1987). Practical implications – Research on managerial discretion does not provide any advice on granting top managers a high or low degree of discretion to either owners or directors of boards. Originality/value – This article concludes that corporate governance scholarship will improve if it abandons the concept of managerial discretion. Key words: Managerial discretion, corporate governance, definitions, measurement, organisational outcomes, usefulness. Paper type: Conceptual paper

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Why is it important?

Purpose – This article assesses the concept of managerial discretion with respect to its theoretical and empirical usefulness for corporate governance research. Design/methodology/approach – This article scrutinises applied theoretical claims, definitions and methods as well as a number of empirical studies on managerial discretion. Findings - To date, neither has an empirical definition of the concept been presented nor has a measurement been developed and tested for reliability and validity that contains all three factors of the managerial discretion concept as proposed by Hambrick and Finkelstein (1987). Practical implications – Research on managerial discretion does not provide any advice on granting top managers a high or low degree of discretion to either owners or directors of boards. Originality/value – This article concludes that corporate governance scholarship will improve if it abandons the concept of managerial discretion. Key words: Managerial discretion, corporate governance, definitions, measurement, organisational outcomes, usefulness. Paper type: Conceptual paper