This study examines determinants of chairman compensation in a supervisory board setting and, specifically, the relationship between chairman and CEO compensation. Using a sample of publicly listed firms in Sweden, the study indicates that chairman compensation – despite its fixed nature –...

Although stock return-based performance metrics are common in CEO compensation contracts in the US, similar CEO pay arrangements may not be appropriate in India given higher stock return volatility and lower liquidity. Instead, sales growth as a performance metric could be useful in...

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...

Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...

Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive...

Criticism of the compensation practice of bonus payments was a key element of the public debate concerning the causes and consequences of the global financial crisis (GFC). Along with the criticism of bonuses in the financial and banking sector, the validity of the performance principle as a...

Performance pay, at least as usually understand, is no good idea for non-executive directors. They have to supervise and control or in some situations even to fire and replace the executive managers. This means that their performance as supervisors is totally different from the performance of...

When a firm has external debt and monitoring by shareholders is essential, managerial bonuses are shown to be an optimal solution. A small managerial bonus linked to firm's performance not only reduces moral hazard between managers and shareholders, but also between creditors and monitoring...

A large, mature and robust economic literature on pay for performance now exists, which provides a useful framework for thinking about pay for performance systems. I use the lessons of the literature to discuss how to design and implement pay for performance in practice.