This paper studies how social relationships between managers and employees affect relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of...

Using archival data from the U.S. passenger airline industry, this study examines whether management control mechanisms aimed at mitigating moral hazard explain outsourcing decisions over and above transaction cost economics (TCE) determinants documented in prior research. Consistent with TCE...

Using hand-collected compensation consultant data, we investigate whether compensation consultants exhibit distinct styles in the determination of CEO pay level and compensation structure. Our tests, which include the use of placebo samples that involve the scrambling of consultants as...

We examine how CEO compensation is affected by the presence of busy and overlap directors. We find that CEOs at firms with more busy directors receive greater total pay, fixed-salary and equity-linked pay and exhibit higher pay-performance (delta) and pay-risk (vega) sensitivities. Our results...

This paper studies the role of match quality for contractual arrangements, wage dynamics and workers' retention. We develop a model in which profit maximizing firms offer a performance-based pay arrangement to retain workers with relatively high match-specific productivity. The key implications...

Recent regulation and legislation, along with the growing influence of compensation consultants and proxy advisors, have led to an increase in performance-contingent awards. A majority of these awards contain performance conditions tied explicitly to accounting measures. Both the structure of...

This paper investigates the effects of the Sarbanes-Oxley Act (SOX) on CEO compensation, using panel data constructed for the S&P 1500 firms on CEO compensation, financial returns, and reported accounting income. Empirically SOX (i) changes the relationship between a firm's abnormal returns and...

Many firms use forced rating systems in which supervisors must evaluate employees according to a predefined distribution. We develop new theory suggesting that forced ratings are less likely to enhance performance when supervisors assess subjective dimensions of employee performance (e.g.,...

This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes-Oxley Act (SOX) on CEO compensation. Using panel data of the S&P 1500 firms, it quantifies welfare gains from a dynamic principal-agent model of...