Understanding CEO compensation plans is a continuing challenge for directors and investors. The disclosure of these plans is dictated by SEC rules that rely heavily on the “fair value” of awards at the time they are granted. The problem with these numbers is that they are static and do not...

We present a modified principal-agent model to identify a link between the anticipated likelihood of future CEO turnover and the optimal sensitivity of incentive pay to firm performance. The analysis focuses on the optimal sequence of standard one-period incentive contracts when CEO effort...

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...

Executive remuneration is often criticised as being excessive and not clearly linked to firm performance. This study further examines the link between pay and performance by examining the impact of promotion-based tournament incentives. Our hypotheses draw on tournament theory of labour...

Despite the many undesirable outcomes of corporate misconduct, scholars have an inadequate understanding of corporate misconduct's causes and mechanisms. We extend the behavioral theory of the firm, which traditionally assumes away the possibility of firm impropriety, to develop hypotheses...

We investigate whether external industry tournament incentives influence the design of executive compensation contracts. Using staggered negative mobility shocks as exogenous disruptions to tournament incentives, we show that firms treated by these shocks act to restore their executives’...

Using data that includes specific contractual details of Relative Performance Evaluation (RPE) contracts granted to executives for 1,833 firms for the period 1998 to 2012, we develop new methods to characterize RPE awards and measure their value and incentive properties. The frequency in the use...