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

This paper studies optimal incentive contracts when workers have career concerns--concerns about the effects of current performance on future compensation. The authors show that the optimal compensation contract optimizes total incentives: the combination of the implicit incentives from career...