The tendency to withhold a larger proportion of formal authority at higher levels of the management hierarchy is called:

Centralisation

The correct answer is Option (2) → Centralisation

Centralisation refers to the concentration of decision-making authority at the top levels of management. When higher-level managers retain most of the power and delegate little authority to subordinates, the organization is said to be highly centralised. In contrast, decentralisation involves distributing authority across various levels of management.