This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated...

This paper develops a framework for studying individuals ideas about what constitutes justcompensation for chief executive officers (CEOs) and reports estimates of just CEO pay andthe principles guiding ideas of justice. The sample consists of students pursuing a Master ofBusiness Administration...

Incentives often fail in inducing economic agents to engage in a desirableactivity; implementability is restricted. What restricts implementability?When does re-organization help to overcome this restriction?This paper shows that any restriction of implementabilityis caused by an identification...

The discussion on value-based performance measures is centered around the concept of residualincome. The main property of residual income is its connection to capital budgeting and the net-present-value-rule. This property is, however, not sufficient to guarantee strong goal congruencebetween...

When designing incentives for a manager, the trade-off between insuranceand a “good” allocation of effort across various tasks is oftenidentified with a trade-off between the responsiveness (sensitivity, precision,signal-noise ratio) of the performance measure and its similarity(congruity,...

This paper determines the cost of employee stock options (ESOs) to shareholders. I present a pricing method that seeks to replicate the empirics of exercise and cancellation as good as possible. In a first step, an intensity-based pricing model of El Karoui and Martellini is adapted to the needs...

There is a debate on whether executive pay reflects rent extraction due to “managerialpower” or is the result of arms-length bargaining in a principal-agent framework. In this paperwe offer a test of the managerial power hypothesis by empirically examining the CEOcompensation of U.S. public...

Many organizations rely on teamwork, and yet field evidence on the impacts of team-basedincentives remains scarce. Compared to individual incentives, team incentives can affectproductivity by changing both workers’ effort and team composition. We present evidencefrom a field experiment...

A large, mature and robust economic literature on pay for performance now exists, whichprovides a useful framework for thinking about pay for performance systems. I use thelessons of the literature to discuss how to design and implement pay for performance inpractice....

We present evidence on the effect of social connections between workers and managerson productivity in the workplace. To evaluate whether the existence of social connections isbeneficial to the firm’s overall performance, we explore how the effects of social connectionsvary with the strength...