FrançaisEnglish

Érudit | Dépôt de documents >
CIRPÉE - Centre interuniversitaire sur le risque, les politiques économiques et l'emploi >
Cahiers de recherche du CIRPÉE >

Please use this identifier to cite or link to this item:

https://depot.erudit.org//id/003659dd

Title: Pay-for-Luck in CEO Compensation: Matching and Efficient Contracting
Authors: Chaigneau, Pierre
Sahuguet, Nicolas
Keywords: CEO Pay
Corporate governance
Pay-for-Luck
Stock-options
Issue Date: 2012-05
Series/Report no.: Cahiers du CIRPÉE;12-24
Abstract: We develop a stylized model of efficient contracting with matching between firms and managers with state-contingent reservation utility. We show that the optimal contract is designed to retain and insure the manager. The retention motive explains pay-for-luck in executive compensation, while the insurance feature explains asymmetric pay-for-luck. This contract can be implemented with call options based on a single performance measure which generally does not filter out luck. When costs of involuntary managerial turnover differ across firms, and the abilities of different managers are more or less precisely estimated ex-ante, the model can also explain the observed association between pay-for-luck and bad corporate governance.
URI: https://depot.erudit.org/id/003659dd
Appears in Collections:Cahiers de recherche du CIRPÉE

Files in This Item:

CIRPEE12-24.pdf, (Adobe PDF ; 358.41 kB)

Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.

 

About Érudit | Subscriptions | RSS | Terms of Use | Contact us |

Consortium Érudit ©  2016