Questions about compensation structures and incentive effects of pay-for-performance components are important for firms' Human Resource Management as well as for economics in general and labor economics in particular. This paper provides scarce insider econometric evidence on the structure and...

This study examines how employees internalize differences in social distance between themselves and their managers when they are competing for a reward given by the manager. In an employer/employee relationship, this difference in social distance between the employer and the various employees...

We show that privatization can be beneficial even if the government is rational and benevolent, and if the firm's economic and informational environment is independent of the governance structure. The model assumes that wage contracts between the firm's owner (government or private entrepreneur)...

It is often argued that Black-Scholes (1973) values overstate the subjective value of stock options granted to risk-averse and under-diversified executives. We construct a “representative” Swiss executive and extend the certainty- equivalence approach presented by Hall and Murphy (2002) to...

This paper investigates whether observed executive compensation contracts are designed to provide risk-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence between firm risk and managerial incentives. We calibrate the...

Variable pay, defined as pay that is tied to some measure of a firm?s output, has become more important for executives of the typical American firm. Variable pay is usually touted as a way to provide incentives to managers whose interests may not be perfectly aligned with those of owners. The...

In this paper I present a theory of the boundary of the firm that accounts for some important characteristics of real-world multidivisional firms: Operative decisions are in the hands of middle managers who are rewarded with incentive contracts based on the performance of their units; Managers'...

The promotion tournament as a potentially important incentive mechanism for top management in transition economies has not been examined by the emerging literature on managerial incentives in transition economies. This paper is the first attempt to fill this important gap in the literature. The...