We analyze the effects of optimism and overconfidence when the manager's compensation package includes severance pay and the CEO has bargaining power. We find that optimism does not affect incentive pay but increases severance pay with a negative effect on profit. Overconfidence, on the...

Chief executive officers (CEOs) are typically paid great amounts of money in wages and bonuses by commercial companies. This is sometimes defended with an argument from peer comparison; roughly that "our" CEO has to be paid in accordance with what other CEOs at comparable companies get. At first...

We investigate the effectiveness of tournament theory based on the age gap between the CEO and the top management team (TMT) in Korean firms. While tournament incentives encourage managers to work harder to improve their performance, their effects may differ on executives’ sociological and...

This paper examines the use of ESG performance metrics in executive compensation contracts. We first document that a growing fraction of publicly traded companies around the world now incorporate ESG metrics in the compensation schemes of their top executives. Our analysis links the reliance on...