For the past 30 years, the conventional wisdom has been that executive compensation packages should include very large proportions of incentive pay. This incentive pay orthodoxy has become so firmly entrenched that the current debates about executive compensation simply take it as a given. We...

Given that an owner cannot commit to her timing strategy under a manager's hidden action, we consider (i) how the owner's timing decisions to launch a project and to replace the manager or change a project are determined, and (ii) how the optimal compensation contract for the manager is...

We test theoretical predictions on when CEOs delegate authority to senior managers in mergers and acquisitions. Using a novel proxy for delegation, we find that CEOs are more likely to delegate when the firm is larger or more complex and are less likely to delegate when they have an...

This paper shows outside directors have an increased chance of obtaining new positions (CEO, COB, directorships) during a CEO turnover year in firms that hire a CEO externally. The new positions are determined by outside directors' CEO hiring source choice (internal or external), not their...

We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. We find that internal governance can mitigate agency problems and ensure firms have substantial value, even without any external governance. Internal...

The career concerns literature predicts that incentives for effort decline as beliefs about ability become more precise (Holmström, 1982/1999). In contrast, we show that effort can increase with belief precision if promotions to better-paid jobs make the returns to reputation non-linear. In...

We analyze the effects of lower bounds on wages on optimal job design within firms. In our model, two tasks affect firm value and an imperfect performance measure. Due to cost advantages of specialization, assigning the tasks to different agents is efficient. Yet a sufficiently large wage floor...

I broadly explore the question by examining several common criticisms of CEO pay through both philosophical and empirical lenses. While some criticisms appear to be unfounded, the analysis shows not only that current compensation practices are problematic both from the standpoint of distributive...

I study a career concerns model in which the principal receives information about the agent's performance from a possibly biased evaluator. The optimal bias solves the tradeoff between ex-post efficiency of the principal's decisions about the agent and incentive provision. It is "anti-agent"...

This paper analyzes how board independence affects a board's monitoring intensity and the CEO pay disparity. We consider a corporate tournament model with a novel feature that the board of directors may lack independence. This has significant implications for a board's monitoring and rewarding...