The average pay of a chief executive officer (CEO) in a top U.S. firm has increased six-fold in the last three decades. Simultaneously, the composition of pay has moved away from salary-based and increasingly toward performance-based compensation in the form of stock grants and stock option...

I study a problem of repeated moral hazard in which the effect of effort is persistent over time: each period's outcome distribution is a function of a geometrically distributed lag of past efforts. I show that when the utility of the agent is linear in effort, a simple rearrangement of terms in...

Many occupations are subject to learning by doing: Effort at the workplace early in the career of a worker results in higher productivity later on. In such occupations, if effort at work is unobservable, a moral hazard problem also arises. We study a particular specification of learning by doing...

I study firm characteristics that justify the use of options or refresher grants in the optimal compensation packages for CEOs in the presence of moral hazard. I model explicitly the determination of stock prices as a function of the output realizations of the firm: Symmetric learning by all...

The first step in understanding the incentives provided to chief executive officers (CEOs) of large public firms is to measure their compensation accurately. This is not a straightforward task, as only partial information on compensation contracts is collected systematically (Execucomp, since...

A look at the recent trends in the use of grants of restricted stocks and options in the compensation packages of chief executive officers (CEOs) of large, public U.S. companies reveals that there have been important changes. These changes coincide with the introduction of two new regulations:...

We study a multiperiod principal-agent problem with moral hazard in which effort is persistent: the agent is required to exert effort only in the initial period of the contract, and this effort determines the conditional distribution of output in the following periods. We provide a...