The concept of managerial discretion in corporate governance – better off without it?

Jon Aarum Andersen
  • Corporate Governance, June 2017, Emerald
  • DOI: 10.1108/cg-09-2016-0176

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

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

Read Publication

http://dx.doi.org/10.1108/cg-09-2016-0176

The following have contributed to this page: Professor Jon Aarum Andersen