We study the evolution of pay in US bank holding companies since 1986 using a structural model of the banking firm. The model incorporates a strong complementarity between capital provided by shareholders and bankers' talent and its non-contractible effort. Bankers' pay is given as solution to...

How to incentivize a manager to create value and be socially responsible? A manager can predict how his decisions will affect measures of social performance, and will therefore game an incentive system that relies on these measures. Still, we show that the compensation contract uses measures of...