Principal-agent theory suggests that a manager should be paid relative to a benchmark that captures the effect of market or sector performance on the firm's own performance. Recently, it has been argued that we do not observe such indexation in the data because executives can set pay in their...

Recent advances in incentive theory stress the multi- dimensional nature of agent effort and specifically cases where workers affect one another's performance through "helping" efforts. This paper models helping efforts as determined by the compensation package and task allocation. The model is...