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Managerial Discretion

In: Managerial Discretion in Imperfect Markets

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  • T. V. S. Ramamohan Rao

    (Indian Institute of Technology Kanpur)

Abstract

Every decision of the management involves some choice. Managerial discretion cannot be described by saying that the management made one choice rather than another. In general, there will be one choice that provides the maximum gain (to the division or the market value of the firm whichever is applicable) and another choice that results in the least gain. If the choice of the management results in a gain between these limits the difference between the maximum and the realized gain constitutes the appropriate measure of managerial discretion. It would generally be useful to identify the motive for the actual decision made. Several measures of managerial discretion are a result of the variety of possible motives. The possibilities are outlined. Some changes in organizational culture and control have been suggested to reign in managerial discretion. However, it is unrealistic to expect that managerial discretion can be eliminated altogether.

Suggested Citation

  • T. V. S. Ramamohan Rao, 2023. "Managerial Discretion," Springer Books, in: Managerial Discretion in Imperfect Markets, chapter 0, pages 21-37, Springer.
    • Handle: RePEc:spr:sprchp:978-981-99-1537-8_2
    DOI: 10.1007/978-981-99-1537-8_2
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