That's the approach I've taken and it has worked out really well. As long as they're getting their work done, I'm not concerned with how much time they're taking off.

How about 8 weeks per year? Or 10 weeks? Would that be fine?

Absolutely, and as a result the manager gets glowing reviews and can also justify an increase in headcount which will improve their status in the organization.

I think your implication that there is some unspoken upper limit is valid, but as long as said upper limit is more than what you would have gotten for vacation days (8 weeks, or 40 days, seems way beyond the normal amount. Microsoft started at 15 days.), there seems little reason to complain. I don’t think you would find anyone willing to allow 364 (modulo weekends) days off each year even for the best employee, so of course it’s not truly unlimited.

If the corporation shoves enough "critical work" down your throat, a manager will not be able to say yes. So the corporation is in control of the amount of time off by setting unrealistic deadlines / workloads.

No, if you are a manager it is your job to keep your employees productive, happy, and fruitful by approving and encouraging ample rest time and pushing a message up the chain that you don't have enough staff to meet expectations.

That's for sure true. "Unlimited" vacation only works if the company has a good WLB in general. At a company like you're describing, having defined PTO days doesn't always help that much either.

I'm a manager with discretionary time off. I default to yes and then push back on deadlines if the PTO means we can't make it. So far it's working.