Agency, Delayed Compensation, and the Structure of Executive Remuneration
AbstractIn this paper we examine the factors affecting the structure of executives' compensation packages. We focus particularly on the role of various types of delayed compensation as means of "bonding" executives to their firms. The basic problem is to design a compensation package that rewards actions that are in the long-run interest of the stockholders. Firms must take into account (1) their ability to discern unfortunate circumstances from mismanagement; (2) the extent to which a compensation package forces the executive to face risks, beyond his control; and (3) the willingness of a given executive to bear this risk. We use our theory to interpret some executive compensation data from the early 1970's. The results are generally in line with the theoretical predictions.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 38 (1983)
Issue (Month): 5 (December)
Other versions of this item:
- Jonathan Eaton & Harvey S. Rosen, 1984. "Agency, Delayed Compensation, and the Structure of Executive Remuneration," NBER Working Papers 0777, National Bureau of Economic Research, Inc.
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
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