Aglaya Ivanovna

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Who decides what should be worked on?

You're right - the reason they review it at all is to retain the power to reject unreasonable proposals (and sometimes to make slight tweaks based on information only they possess).  Sometimes they make the goals more ambitious, too.

90% of the time, though (and 100% of the time in my company's short existence), the proposals coming from below are almost exactly what they wanted - the communication outside of strategic planning exercises is sufficient to ensure that.

Who decides what should be worked on?

You're precisely right - I've asked it myself in order to see if the company operates in a reasonable manner or not :)

Your second point is spot on as well - it mostly comes from more junior candidates (which, numerically, is the bulk of the people we hire), and from the follow-ups I get, it does often seem to be asked in earnest from that population.