We construct a new index of CEO general managerial skill using the industry composition of the CEO compensation peer group and use it to examine the relation between CEO general skill and CEO pay. Our index has the advantage of capturing the board's perception of CEO general skill and is less...

Any firm choosing a CEO faces a double problem: candidate selection and choice of a compensation scheme. We derive sufficient conditions where the unique optimal compensation scheme is a capped-bonus contract in a pure moral-hazard environment, while equity is used when the firm also faces...

When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...