This dissertation addresses the question of effective delegation, exploring it through the concept of managerial discretion (i.e., a latitude of managerial actions, which lie in the zone of shareholders’ acceptance). While the corporate governance perspective on managerial discretion focuses mainly on the costs associated with delegation, the strategic management perspective emphasizes its benefits in creating value for the firm. Building on research in corporate governance and strategic management, this dissertation develops and empirically tests a theoretical framework that explains how the two distinct dimensions of managerial discretion jointly influence organizational outcomes. The proposed framework illuminates the importance of balance between the restraining and enabling decisions undertaken by professional managers. This dissertation makes a two-fold contribution to the field of corporate governance. First, it identifies and explains organizational and environmental forces that jointly shape strategic and governance dimensions of managerial discretion, redefining the concept. Second, it conceptually and empirically explores an integrative model of managerial discretion within the broader corporate governance framework, providing evidence of the joint effects of governance and strategic dimensions of discretion on organizational outcomes. The results suggest that the effect of governance dimension of managerial discretion on a firm’s performance is contingent on the strategic dimension of discretion. This draws attention to potential strategic implications of board monitoring over managerial decision making. While the majority of studies emphasize the benefits of increased control over managerial decision making, particularly stressing board monitoring, this dissertation also considers the benefits of delegation for firms’ strategic development. By reversing the polarity of the current emphasis on disciplining managers, this dissertation provides a more balanced view of the notion of corporate governance. The value of this approach derives from the integrated model, which highlights the benefits and the costs of delegation.