RAJAN, MADHAV V.; REICHELSTEIN, STEFAN - In: Journal of Accounting Research 44 (2006) 3, pp. 585-618
Key indicators of managerial performance are frequently subjective, that is, they are difficult to specify and/or verify for contracting purposes. When a principal must rely on subjective information to create incentives for a group of agents, discretionary bonus pools are shown to be optimal...