A thorough understanding of internal incentive structures is critical to developing a viable theory of the firm, since these incentives determine to a large extent how individuals inside an organization behave. Many common features of organizational incentive systems are not easily explained by...

Our estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth. Although the incentives generated by stock ownership are large relative to pay...

I have long supported increased managerial holdings of equity to reduce the conflicts of interest between stockholders and their agent managers. Yet I recommend that a company never again issue another typical standard executive stock option. The vast increase in the use of options in managerial...

Paying top executives better would eventually mean paying them more. The arrival of spring means yet another round in the national debate over executive compensation. Soon the business press will trumpet answers to the questions it asks every year: Who were the highest paid CEOs? How many...

Social and economic activities, like religion, entertainment, education, research, and the production of other goods and services, are carried on by different types of organizations, for example, corporations, proprietorships, partnerships, mutuals and nonprofits. There is competition among...

Keynote Address to the European Financial Management Association, London, June 2002This paper received the European Financial Management Readers' Choice Best Paper Award for 2004My intention today is to provide a way to understand some of what's currently happening in the world of finance and...