ORLAINE
APRIL T. TOLENTINO, MBA
ABSTRACT
This
article aims to assess the positive and negative effects of management
discretion and how it becomes an issue of morality in the organization. It
identifies the moral arguments and limitations on the exercise of management
discretion, how it becomes unfavorable and detrimental to an organization, and
how it is perceived on a positive light which promotes common good. The author
concludes that although the exercise of management discretion has been
negatively perceived, there is a strong conviction that man is has an innate
ability to make moral judgments.
Keywords: Management directions, ethical
implications, positive use, abuse of discretion
INTRODUCTION
Discretion is plainly defined as an exercise of
one’s own authority and judgment (Webster’s Third International Unabridged
Dictionary). Sandilands (n.d.) provides a deeper sense to the definition and
says that discretion it is “the ability
to make a judgment, a choice or a responsible decision.” The etymology of
the word date back to the 13th century where the word dyscrecyounne was first introduced and understood as the "ability to perceive and
understand," and later on was given meaning in the mid-14th
century as a "moral discernment,
ability to distinguish right from wrong" (Online Etymology Dictionary,
n.d.). The
understanding of discretion as a moral discernment is supported and explained
further through the theory that “man is a thinking being who acts with purpose and reason… and knows whether
his actions are right or wrong/good or bad… and that man is a free being who
acts according to his will and volitions and he has the capacity to exercise
his choices and to choose and do what is good” (Abun, D. 2013).
Discretion therefore, can be understood as moral judgment.
The terms Management Discretion,
Management Prerogative, or Employer Discretion are commonly used
interchangeably in the business world. These terms imply the right of an
employer to make decisions that are deemed beneficial to the operation of the
business. Discretionary powers are most often vested to high-ranking officers
in a company who include department heads, managers, and directors who have a
direct hand in the management of the company’s business operations. They may
have the discretion on the company’s finances, discretion to hire or fire
employees or discretion on the disclosure of company information.
Limitations
to the exercise of discretion
The right to exercise discretion in
making business decisions, however, is substantially bounded by the policies of
each organization and by enacted laws. Every company has its written or
unwritten rules stating the limits or each manager’s authority – often in the
form of a job description or appointment letter. These limitations serve as the
control measure in the exercise of discretion in decision-making. Issues
related to abuse of discretion most frequently arise when managers over-step
these limitations. In order to avoid this, the company’s top management must
spell out clearly its rules and define the manager’s decision-making limits. In
such cases that the manager makes decisions out of his capacity, top management
must stand firm to impose the corresponding disciplinary measure to the erring
manager.
Positive
Use
Although the view on discretion
varies from person to person, the exercise of discretion is pre-supposed to
benefit the interest of the organization. Lord Scarman (n.d.), an English judge and barrister, who served as a Law
Lord
of England called discretion as “the
Art of suiting action to particular circumstances.” Further, the idiom “Discretion is the better part of valor”
is generally understood to mean the avoidance of problems or unnecessary risks
by thinking carefully and exercising caution before taking action.
According
to Espedal, B. (2013), “Managerial discretion is
generally seen as a leadership capacity that affects organizations’ ability to
adapt to new and changing demands and circumstances.”
When exercised correctly, discretion
becomes both an advantage and leverage for an organization to adapt to the
consistent developments in the business world.
In addition, a study entitled “In Search of Informed
Discretion: An Experimental Investigation of Fairness and Trust Reciprocity”,
which was written by Victor S.Maas, Marcel van Rinsum and Kristy L.Towry and
published in The Accounting Review revealed that that most managers are
driven by powerful, non-selfish motives that include a strong preference for
fairness. Although the use of managerial discretion is often associated with
favoritism, the study revealed that managers have an
inherent interest in fairness and trust reciprocity.
Above
all, ethical consideration must be taken into account in order to maximize the
benefit of management discretion, citing the statement of Acosta, P. (2015) to
wit:
“For
one, as in all cases involving the use of management prerogative, it must be
exercised in good faith for the advancement of the employer’s interest, not for
the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements”
Abuse
of Discretion
Discretion when exercised without
careful consideration of facts and law constitute an abuse and raises the issue
morality. One of the areas in an organization which is most concerned with
regards to the use of discretion is human resources. The use of discretionary
measures in the selection and appointment, performance appraisal, promotion,
and employee discipline and termination, are often regarded with issues of
morality.
The
case of Dumisa vs The University of Durban Westville (2001, 7 BALR 753) tackles
an issue on promotion where the employer decided not to promote the employee,
Dumisa, citing the latter’s failure to meet the promotional policy criteria.
And while there was no issue on the promotional policy criteria, it was found
that the employer made a previous promise to consider the employee for
promotion creating an expectation on the part of the employee. There is a
question therefore as to what grounds does a manger have the discretion to
decide that whether an employee is not suitable for promotion?
The
“Endo” (coined term for End-of-Contract) is one of the recent issues of unfair
labor practice in the Philippines, to which President Rodrigo R. Duterte has
vetoed the bill that seeks to prohibit the practice of labor-only contracting
method. A majority of companies in the Philippines who employ a large number of
workers practice labor-only contracting, wherein the tenure of the said workers
is up to six (6) months. However, to avoid a labor law granting permanent
tenure on the sixth month of service of the employee, these companies hire their
workers up to five (5) months only. The bill has been snubbed by many business
groups and they argued that “Job contracting as an exercise of management
prerogative and business judgment is anchored on two constitutional rights:
right and freedom to contract and right to property.”
CONCLUSION
The question whether management
discretion is beneficial or detrimental to a business is debatable. On the point of view of the business owner,
they may rightfully look at discretion more positively. After all, no business
owner would execute a decision or an action that may be detrimental to his
business. However, there is an underlying issue whether the person who posess
such discretionary power has the adequate knowledge and experience, and the
morality to make responsible and sound and responsible decisions. According to
the great Greek philosopher, Socrates, knowledge of good and evil and its
criteria are imbued in man and he can differentiate between the two if he
desires so. Considering this innate ability to determine good and bad, and if a
person possesses the qualities of a strong moral leader, he is likely to make
moral judgments that is aimed towards common good.
REFERENCES
1.Sandilands, Tracey.
(n.d.). What Does Discretion Mean in the Business World? Small Business -
Chron.com. Retrieved
from http://smallbusiness.chron.com/discretion-mean-business-world-50093.html
2.
Israelstam, Ivan.
(2014) Management Discretion: How far does it stretch?
Retrieved
from http://www.hrpulse.co.za/editors-pick/231598-management-discretion-how-far-does-it-stretch
3. Karlsson,
T. S. (2018) Searching for managerial discretion: how public managers engage
managerialism as a rationalization for increased latitude of action.
4.
Acosta, P. (2015),
Management prerogative must be exercised in good faith, The Manila Times.
Retrieved
from https://www.manilatimes.net/2015/10/29/legal-advice/dearpao/management-prerogative-must-be-exercised-in-good-faith/226288/
5.
Cigaral, I. N. (2019)
Why Duterte vetoed the anti-endo bill, Philstar.
Retrieved
from https://www.philstar.com/business/2019/07/26/1938064/why-duterte-vetoed-anti-endo-bill
6. Cigaral,
I. N. (2019) Upsetting key campaign promise,
Duterte officially vetoes anti-endo bill, Philstar.
Retrieved from https://www.philstar.com/business/2019/07/26/1938050/duterte-vetoes-anti-endo-bill#0yyf8CcFoAXXbx6K.99
7.
Abun,
D. (2013) Be A Moral Judge Of Your Action.
8.
Espedal, B. (2013) Is
managerial discretion good or bad for organizational adaptiveness? Retrieved
from https://journals.sagepub.com/doi/abs/10.1177/1742715013514879?journalCode=leaa#
9. Rinsum, M. v. (2013) Informed Discretion in
Performance Evaluations, Rotterdam School Of Management, Erasmus University.
Retrieved from https://discovery.rsm.nl/articles/detail/87-informed-discretion-in-performance-evaluations/
11.
Leslie Scarman, Baron
Scarman (b.1911-d.2004) on Wikipedia https://en.wikipedia.org/wiki/Leslie_Scarman,_Baron_Scarman
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