We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in...

A principal who has a project with uncertain returns must retain and incentivize an agent using promise of future payments and information control. The agent's effort produces output and facilitates information gathering. The principal controls the informativeness of the agent's effort by...

We analyze how the reputational concerns of boards influence executive compensation and the use of hidden pay. Independent boards reduce disclosed pay to signal their independence, but are more likely to use inefficient hidden pay than manager-friendly boards. Stronger reputational pressures...

Efforts to control bank risk address the wrong problem in the wrong way. They presume that the financial crisis was caused by CEOs who failed to supervise risk-taking employees. The responses focus on executive pay, believing that executives will bring non-executives into line — using...

This paper demonstrates that a principal may optimally remunerate her agents unequally, even if these have equal characteristics. We show this in a simple moral hazard model where agents' efforts are continuous choice variables. Unequal remuneration allows the principal to minimize...

I study when a firm prefers to be transparent about pay using a simple multidimensional signaling model. Pay transparency within the firm means that a worker can learn about his own worker-firm match from another worker's pay. This can either encourage or discourage workers-which affects...

Tournaments are commonly used in the workplace to determine promotion, assign bonuses, and motivate personal development. Tournament-based contracts can be very effective in eliciting high effort, often outperforming other compensation contracts, but they can also have negative consequences for...