constraints that act on these processes, leave managers with considerable power to shape their own pay arrangements. Examining the …

instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself … managers. As a result, managers wield substantial influence over their own pay arrangements, and they have an interest in … reducing the saliency of the amount of their pay and the extent to which that pay is de-coupled from managers’ performance. We …

should err in favour of the arrangement that is less favourable to managers. Such an approach, we show, would make it most …