Help
Cart
Skip main navigation

Available Issues

April 10, 2013 - June 5, 2026

Available Issues

April 10, 2013 - June 5, 2026

Fair and Square: A Retention Model of Managerial Compensation

Published Online:13 Aug 2021https://doi.org/10.1287/mnsc.2021.4062

References

  • Acharya VV, John K, Sundaram RK (2000) On the optimality of resetting executive stock options. J. Financial Econom. 57(1):65–101.Crossref, Google Scholar
  • Akerlof G (1982) Labor contracts as partial gift exchange. Quart. J. Econom. 97(4):543–569.Crossref, Google Scholar
  • Almazan A, Suarez J (2003) Entrenchment and severance pay in optimal governance structures. J. Finance 58(2):519–547.Crossref, Google Scholar
  • Anderson RC, Reeb D (2003) Founding-family ownership and firm performance: Evidence from S & P 500. J. Finance 58(3):1301–1328.Crossref, Google Scholar
  • Anderson MC, Banker RD, Ravindran S (2000) Executive compensation in the information technology industry. Management Sci. 46(4):530–547.Link, Google Scholar
  • Bandiera O, Guiso L, Prat A, Sadun R (2015) Matching firms, managers and incentives. J. Labor Econom. 33(3):623–681.Crossref, Google Scholar
  • Bartling B, Schmidt KM (2015) Reference points, social norms, and fairness in contract renegotiations. J. Eur. Econom. Assoc. 13(1):98–129.Crossref, Google Scholar
  • Bebchuk LA, Fried JM (2004) Pay Without Performance: The Unfulfilled Promise of Executive Compensation (Harvard University Press, Cambridge, MA).Google Scholar
  • Bebchuk LA, Fried JM, Walker DI (2002) Managerial power and rent extraction in the design of executive compensation. Univ. Chicago Law Rev. 69(3):751–846.Crossref, Google Scholar
  • Bell B, Pedemonte S, van Reenen J (2021) CEO pay and the rise of relative performance contracts: A question of governance. J. Eur. Econom. Assoc. Forthcoming.Crossref, Google Scholar
  • Bénabou R, Tirole J (2016) Bonus culture: Competitive pay, screening, and multitasking. J. Political Econom. 124(2):305–370.Crossref, Google Scholar
  • Bertrand M, Mullainathan S (2001) Are CEOs rewarded for luck? The ones without principals are. Quart. J. Econom. 116(3):901–932.Crossref, Google Scholar
  • Bettis C, Bizjak J, Coles J, Kalpathy S (2010) Stock and option grants with performance-based vesting provisions. Rev. Financial Stud. 23(10):3849–3888.Crossref, Google Scholar
  • Binmore KG, Shaked A, Sutton J (1989) An outside option experiment. Quart. J. Econom. 104(4):753–770.Crossref, Google Scholar
  • Blakemore AE, Low SA, Ormiston MB (1987) Employment bonuses and labor turnover. J. Labor Econom. 5S:S114–S135.Google Scholar
  • Bosse DA, Phillips RA (2016) Agency theory and bounded self-interest. Acad. Management Rev. 41(2):276–297.Crossref, Google Scholar
  • Brandts J, Charness G, Ellman M (2016) Let’s talk: How communication affects contract design. J. Eur. Econom. Assoc. 14(4):943–974.Crossref, Google Scholar
  • Breza E, Kaur S, Shamdazani Y (2018) The morale effects of pay inequality. Quart. J. Econom. 133(2):611–663.Crossref, Google Scholar
  • Core JE, Guay WR (2001) Stock option plans for non-executive employees. J. Financial Econom. 61(2):253–287.Crossref, Google Scholar
  • Correa R, Lel U (2016) Say on pay laws, executive compensation, pay slice, and firm valuation around the world. J. Financial Econom. 122(3):500–520.Crossref, Google Scholar
  • Cremers M, Grinstein Y (2014) Does the market for CEO talent explain controversial CEO pay practices? Rev. Finance 18(3):921–960.Crossref, Google Scholar
  • Cuñat V, Giné M, Guadalupe M (2016) Say pays! Shareholder voice and firm performance. Rev. Finance 20(5):1799–1834.Crossref, Google Scholar
  • de Meza D, Webb DC (2007) Incentive design under loss aversion. J. Eur. Econom. Assoc. 5(1):66–92.Crossref, Google Scholar
  • DeVaro J, Kim J-H, Vikander N (2018) Non performance pay and relational contracting: Evidence from CEO compensation. Econom. J. (London) 128(613):1923–1951.Google Scholar
  • Dittmann I, Maug E, Spalt O (2010) Sticks or carrots? Optimal CEO compensation when managers are loss-averse. J. Finance 65(6):2015–2050.Crossref, Google Scholar
  • Dutta S (2003) Capital budgeting and managerial compensation: Incentive and retention effects. Accounting Rev. 78(1):71–93.Crossref, Google Scholar
  • Edmans A, Gabaix X (2016) Executive compensation: A modern primer. J. Econom. Literature 54(4):1232–1287.Crossref, Google Scholar
  • Edmans A, Gabaix X, Landier A (2009) A multiplicative model of optimal CEO incentives in market equilibrium. Rev. Financial Stud. 22(12):4881–4917.Crossref, Google Scholar
  • Ellingsen T, Kristiansen EG (2011) Financial contracting under imperfect enforcement. Quart. J. Econom. 126(1):323–371.Crossref, Google Scholar
  • Englmaier F, Leider S (2012) Contractual and organizational structure with reciprocal agents. Amer. Econom. J. Microeconom. 4(2):146–183.Crossref, Google Scholar
  • Englmaier F, Muehlheusser G, Roider A (2014) Optimal incentive contracts for knowledge workers. Eur. Econom. Rev. 67(1):82–106.Crossref, Google Scholar
  • Estlund CL (2006) Between rights and contract: Arbitration agreements and non-compete covenants as a hybrid form of employment law. Univ. Pennsylvania Law Rev. 155:379–445.Crossref, Google Scholar
  • Fahlenbrach R (2009) Shareholder rights, boards, and executive compensation. Rev. Finance 13(1):81–113.Crossref, Google Scholar
  • Fahn M, Klein N (2019) Relational contracts with private information on the future value of the relationship: The upside of implicit downsizing costs. Amer. Econom. J. Microeconom. 11(4):33–58.Crossref, Google Scholar
  • Fehr E, List J (2004) The hidden costs and returns of incentives—Trust and trustworthiness among CEOs. J. Eur. Econom. Assoc. 2(5):743–771.Crossref, Google Scholar
  • Fehr E, Goette L, Zehnder C (2009a) A behavioral account of the labor market: The role of fairness concerns. Annual Rev. Econom. 1:355–384.Crossref, Google Scholar
  • Fehr E, Hart O, Zehnder C (2009b) Contracts, reference points, and competition–behavioral effects of the fundamental transformation. J. Eur. Econom. Assoc. 7(2–3):561–572.Crossref, Google Scholar
  • Fehr E, Hart O, Zehnder C (2011) Contracts as reference points—Experimental evidence. Amer. Econom. Rev. 101(2):493–525.Crossref, Google Scholar
  • Fehr E, Hart O, Zehnder C (2015) How do informal agreements and revision shape contractual reference points? J. Eur. Econom. Assoc. 13(1):1–28.Crossref, Google Scholar
  • Fehr E, Kirchsteiger G, Riedl A (1993) Does fairness prevent market clearing? An experimental investigation. Quart. J. Econom. 108(2):437–459.Crossref, Google Scholar
  • Fernandes N, Ferreira MA, Matos P, Murphy KJ (2013) Are U.S. CEOs paid more? New international evidence. Rev. Financial Stud. 26(2):323–367.Crossref, Google Scholar
  • Ferri F, Göx RF (2018) Executive compensation, corporate governance, and say on pay. Foundations Trends Accounting 12(1):1–103.Crossref, Google Scholar
  • Ferri F, Maber DA (2013) Say on pay votes and CEO compensation: Evidence from the UK. Rev. Finance 17(2):527–563.Crossref, Google Scholar
  • Fong EA, Misangyi VF, Tosi HL (2010) The effect of CEO pay deviations on CEO withdrawal, firm size, and firm profits. Strategic Management J. 31(6):629–651.Crossref, Google Scholar
  • Frydman C, Saks R (2010) Executive compensation: A new view from a long-term perspective, 1936–2005. Rev. Financial Stud. 23(5):2099–2138.Crossref, Google Scholar
  • Gabaix X, Landier A (2008) Why has CEO pay increased so much? Quart. J. Econom. 123(1):49–100.Crossref, Google Scholar
  • Ganco M, Ziedonis R, Agarwal R (2015) More stars stay, but the brightest ones still leave: Job hopping in the shadow of patent enforcement. Strategic Management J. 36(5):659–685.Crossref, Google Scholar
  • Garmaise MJ (2011) Ties that truly bind: Non-competition agreements, executive compensation and firm investment. J. Law Econom. Organ. 27(2):376–425.Crossref, Google Scholar
  • Gartenberg C, Wulf J (2017) Pay harmony: Social comparison and performance compensation in multibusiness firms. Organ. Sci. 28(1):39–55.Link, Google Scholar
  • Garvey G, Milbourn TT (2006) Asymmetric benchmarking in compensation: Executives are rewarded for good luck but not penalized for bad. J. Financial Econom. 82(1):197–225.Crossref, Google Scholar
  • Gaver JJ, Gaver KM (1993) Additional evidence on the association between the investment opportunity set and corporate financing, dividend, and compensation policies. J. Accounting Econom. 16(1–3):125–160.Crossref, Google Scholar
  • Giannetti M (2011) Serial CEO incentives and the structure of managerial contracts. J. Financial Intermediation 20(4):633–662.Crossref, Google Scholar
  • Gipper B (2021) The economic effects of expanded compensation disclosure. J. Accounting Econom. Forthcoming.Crossref, Google Scholar
  • Goldman EM, Huang PP (2015) Contractual vs actual separation pay following CEO turnover. Management Sci. 61(5):1108–1120.Link, Google Scholar
  • Gomez-Mejia LR, Larraza-Kintana M, Makir M (2003) The determinants of executive compensation in family-controlled public corporations. Acad. Management J. 46(2):226–237.Google Scholar
  • Groysberg B, Lee L-E, Nanda A (2008) Can they take it with them? The portability of star knowledge workers’ performance. Management Sci. 54(7):1213–1230.Link, Google Scholar
  • Halonen-Akatwijuka M, Hart O (2013) More Is Less: Why Parties May Deliberately Write Incomplete Contracts (Harvard University).Crossref, Google Scholar
  • Halonen-Akatwijuka M, Hart O (2020) Continuing contracts. J. Law Econom. Organ. 36(2):284–313.Crossref, Google Scholar
  • Harris M, Holmström B (1982) A theory of wage dynamics. Rev. Econom. Stud. 49(3):315–333.Crossref, Google Scholar
  • Hart O (2008) Reference points and the theory of the firm. Economica 75(299):404–411.Crossref, Google Scholar
  • Hart O (2009) Hold-up, asset ownership, and reference points. Quart. J. Econom. 124(1):267–300.Crossref, Google Scholar
  • Hart O, Holmström B (2010) A theory of firm scope. Quart. J. Econom. 125(2):483–513.Crossref, Google Scholar
  • Hart O, Moore J (2008) Contracts as reference points. Quart. J. Econom. 123(1):1–48.Crossref, Google Scholar
  • Hashimoto M (1979) Payments, on-the-job training, and lifetime employment in Japan. J. Political Econom. 87(5):1086–1104.Crossref, Google Scholar
  • Herweg F, Schmidt KM (2015) Loss aversion and inefficient renegotiation. Rev. Econom. Stud. 82(1):297–332.Crossref, Google Scholar
  • Herweg F, Müller D, Weinschenk P (2010) Binary payment schemes: Moral hazard and loss aversion. Amer. Econom. Rev. 100(5):2451–2477.Crossref, Google Scholar
  • Himmelberg CP, Hubbard RG, Palia D (1999) Understanding the determinants of managerial ownership and the link between ownership and performance. J. Financial Econom. 53(3):353–384.Crossref, Google Scholar
  • Holmström B (1983) Equilibrium long-term labor contracts. Quart. J. Econom. 98(Supplement):23–54.Crossref, Google Scholar
  • Holmström B, Kaplan S (2003) The state of US corporate governance. J. Appl. Corporate Finance 15(3):8–20.Crossref, Google Scholar
  • Holmström B, Ricart i Costa J (1986) Managerial incentives and capital management. Quart. J. Econom. 101(4):835–860.Crossref, Google Scholar
  • Hubbard RG (2005) Pay without performance: A market equilibrium critique. J. Corporate Law. 30(Summer):717–720.Google Scholar
  • Iliev P, Vitanova S (2019) The effects of say on pay in the U.S. Management Sci. 65(10):4505–4521.Link, Google Scholar
  • Inderst R, Mueller HM (2010) CEO replacement under private information. Rev. Financial Stud. 23(8):2935–2969.Crossref, Google Scholar
  • Ittner CD, Lambert RA, Larcker DF (2003) The structure and performance consequences of equity grants to employees of new economy firms. J. Accounting Econom. 34(1–3):89–127.Crossref, Google Scholar
  • Johnson SA, Tian YS (2000) The value and incentive effects of nontraditional executive stock option plans. J. Financial Econom. 57(1):3–34.Crossref, Google Scholar
  • Kessler J, Leider S (2012) Norms and contracting. Management Sci. 58(1):62–77.Link, Google Scholar
  • Kole SR (1997) The complexity of compensation contracts. J. Financial Econom. 43(1):79–104.Crossref, Google Scholar
  • Kvaløy O, Olsen T (2012) The rise of individual performance pay. J. Econom. Management Strategy 21(2):493–518.Crossref, Google Scholar
  • Lazear EP, Oyer P (2012) Personnel economics. Gibbons R, Roberts DJ, eds. Handbook of Organizational Economics, vol. 3 (Elsevier, New York), 479–519.Crossref, Google Scholar
  • Marx M, Strumsky D, Fleming L (2009) Mobility, skill, and the Michigan non-compete experiment. Management Sci. 55(6):875–889.Link, Google Scholar
  • Mehran H (1995) Executive compensation structure, ownership, and firm performance. J. Financial Econom. 38(2):163–184.Crossref, Google Scholar
  • Murphy KJ (1999) Executive compensation. Aschenfelter O, Card D, eds. Handbook of Labor Economics, vol. 3B (Elsevier, New York), 2485–2563.Crossref, Google Scholar
  • Murphy KJ (2003) Stock-based pay in new economy firms. J. Accounting Econom. 34(1–3):129–147.Crossref, Google Scholar
  • Murphy K, Zabojnik J (2004) CEO pay and appointments: A market-based explanation for recent trends. Amer. Econom. Rev. 94:192–196.Crossref, Google Scholar
  • Murphy K, Zabojnik J (2006) Managerial capital and the market for CEOs. Queen’s Economics Department Working Paper No. 1110.Google Scholar
  • Non A (2012) Gift-exchange, incentives, and heterogeneous workers. Games Econom. Behav. 75(1):319–336.Crossref, Google Scholar
  • Ockenfels A, Sliwka D, Werner P (2014) Bonus payments and reference point violations. Management Sci. 61(7):1496–1513.Link, Google Scholar
  • Osborne MJ, Rubinstein A (1990) Bargaining and Markets (Academic Press, San Diego).Google Scholar
  • Oyer P (2004) Why do firms use incentives that have no incentive effects? J. Finance 59(4):1619–1649.Crossref, Google Scholar
  • Oyer P, Schaefer S (2005) Why do some firms give stock options to all employees? An empirical examination of alternative theories. J. Financial Econom. 76(1):99–133.Crossref, Google Scholar
  • Pakes A, Nitzan S (1983) Optimal contracts for research personnel, research employment, and the establishment of” rival” enterprises. J. Labor Econom. 1(4):345–365.Crossref, Google Scholar
  • Palia D (2001) The endogeneity of managerial compensation in firm valuation: A solution. Rev. Financial Stud. 14(3):735–764.Crossref, Google Scholar
  • Perry T, Zenner M (2001) Pay for performance? Government regulation and the structure of compensation contracts. J. Financial Econom. 62(3):453–488.Crossref, Google Scholar
  • Prendergast C (2002) The tenuous trade-off between risk and incentives. J. Political Econom. 110(5):1071–1102.Crossref, Google Scholar
  • Raith M (2003) Competition, risk and managerial incentives. Amer. Econom. Rev. 93(4):1425–1436.Crossref, Google Scholar
  • Rajan R, Zingales L (2001) The firm as a dedicated hierarchy: A theory of the origins and growth of firms. Quart. J. Econom. 116(3):805–851.Crossref, Google Scholar
  • Rajgopal S, Shevlin T, Zamora V (2006) CEOs’ outside employment opportunities and the lack of relative performance evaluation in compensation contracts. J. Finance 61(4):1813–1844.Crossref, Google Scholar
  • Rosen S (1981) The economics of superstars. Amer. Econom. Rev. 71(5):845–858.Google Scholar
  • Rosen S (1992) Contracts and the market for executives. Werin L, Wijkander H, eds. Contract Economics (Blackwell, Cambridge, MA and Oxford), 181–211.Google Scholar
  • Rubinstein A (1982) Perfect equilibrium in a bargaining model. Econometrica 50(1):97–109.Crossref, Google Scholar
  • Schwab SJ, Thomas RS (2006) An empirical analysis of CEO employment contracts: What do top executives bargain for? Washington Lee Law Rev. 65(1):231–270.Google Scholar
  • Smith CJ, Watts RL (1992) The investment opportunity set and corporate financing, dividend, and compensation policies. J. Financial Econom. 32(3):263–292.Crossref, Google Scholar
  • Starr E, Prescott JJ, Bishara ND (2021) Noncompete agreements in the U.S. labor force. J. Law Econom. Forthcoming.Crossref, Google Scholar
  • Terviö M (2008) The difference that CEOs make: An assignment model approach. Amer. Econom. Rev. 98(3):642–668.Crossref, Google Scholar
  • Verkerke JH (2009) Discharge. Dau-Schmidt KG, Harris S, Lobel O, eds. Labor and Employment Law and Economics, vol. 2, Encyclopedia of Law and Economics, 2nd ed. (Edward Elgar Publishing, Northampton, UK), 447–479.Crossref, Google Scholar
  • Waldman M (1984) Job assignments, signalling, and efficiency. RAND J. Econom. 15(2):255–267.Crossref, Google Scholar
  • Waldman M (2012) Theory and evidence on internal labor markets. Gibbons R, Roberts J, eds. Handbook of Organizational Economics (Princeton University Press, Princeton, NJ), 520–571.Google Scholar
  • Yermack D (2006) Golden handshakes: Separation pay for retired and dismissed CEOs. J. Accounting Econom. 41(3):237–256.Crossref, Google Scholar
Previous
Back to Top
Next
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.
Agree