We model relative performance evaluation (RPE) when a Chief Executive Officer (CEO) has the power to opportunistically influence the design of RPE by choosing the weight on an index-based peer group or by customizing the selection of peers comprising a peer group. A powerful CEO compares the...

In the empirical estimation of the relation between CEO pay and both firm and peer performance, researchers typically include conventional accounting-based measures that reflect firm performance net of executive pay expense. We analytically show that when firms evaluate CEO performance relative...

We study S&P 500 firms’ disclosure of relative performance evaluation (RPE) details in their first proxy statement filing after the effective date of an SEC rule mandating expanded executive compensation disclosures. Using theoretically-developed implicit techniques to detect RPE use, we...

In tests of the relative performance evaluation (RPE) hypothesis, researchers rarely, if ever, aggregate peer performance in the same way as a firm’s board of directors. Framed as a standard errors-in-variables problem, a commonly-held view is that such aggregation errors induce an attenuation...

This study uses principal agent analysis to investigate how the principal’s use of performance measures in the agent’s compensation contract are affected by (1) links between performance measures and (2) substitute and complementary characteristics of an agent’s efforts. We show that the...