In assessing the performance of the CEO, subjectivity by the board of directors is often present in one form or another. We specifically focus on: (1) the ex ante option to ex post override a formula-based contract (“discretionary bonus”), and (2) the ex ante absence of any formula in a...

In this paper, we address the question whether performance measures that are specified in annual bonus contracts represent overall performance dimensions used by boards of directors in making governance decisions. Recent studies claim that managerial incentives are predominantly provided by...