When verifiable performance measures are imperfect, organizations often resort to subjective performance pay. This may give supervisors the power to direct employees towards tasks that mainly benefit the supervisor rather than the organization. We cast a principal-supervisor-agent model in a...

This study examines the determinants of performance measurement tailoring between top management and middle managers in compensation contracts. Theoretically, while tailoring potentially enhances the informativeness of performance measures for top management and middle managers respectively, it...