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

In: Corporate governance: international journal of business in society, Band 17, Heft 3, S. 574-587

Abstract

PurposeThis paper aims to assess the concept of managerial discretion with respect to its theoretical and empirical usefulness for corporate governance research.Design/methodology/approachThis paper scrutinises applied theoretical claims, definitions and methods, as well as a number of empirical studies on managerial discretion.FindingsTo date, no empirical definition of the concept has been presented and no measurement has 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 implicationsResearch on managerial discretion does not provide owners and directors of boards with any advice on granting top managers a high or low degree of discretion.Originality/valueThis paper concludes that corporate governance scholarship will improve if it abandons the concept of managerial discretion.