Managerial discretion

It is generally agreed that state ownership presents a different management situation from private ownership, that the behaviour of managers in state-owned enterprises differs from that of managers in private enterprises, and that these differences vary according to the national setting. This paper argues that differences in management behaviour are best analyzed in terms of managerial discretion. Managerial discretion, according to Williamson, is defmed as the ability of managers to choose and pursue objectives and strategies that differ from those of the owners. 1 State-owned enterprises, on the other hand, do not exist solely to maximize profits; they have multiple objectives reflecting conflicting public needs and political pressures. Managerial discretion in state-owned enterprises cannot be stated simply in terms of divergence from profit maximization or from any other single objective. The absence of clearly defined goals for state-owned enterprises forms the basis for differences in managerial discretion between private and state-owned enterprises.