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Although stock options are commonly observed in chief executive o±cer (CEO) compensation contracts, there is theoretical controversy about whether stock options are part of the optimal contract. Using a sample of Fortune 500 companies, we solve an agency model calibrated to the company-specific...
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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,...
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the performance measure and its similarity (congruity, congruence) to the benefit of the manager’s employer. A necessary …
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Risk-neutral individuals take more risky decisions when they have limited liability. Risk-neutral managers may not when … return. Further results on the form of contracts are also derived. -- managers ; risky decisions ; limited liability …
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