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Work-related perks, agency problems, and optimal incentive contracts

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  • Anthony M. Marino
  • Ján Zábojník

Abstract

Work-related perks, such as corporate jets, nice offices, and so forth, improve the tradeoff between incentives and insurance that determines the optimal incentive contract. We show that (i) such perks may be offered even if their direct consumption benefits are offset by their costs; (ii) they will be offered for free; (iii) agents in more uncertain production environments will receive more perks; (iv) senior executives should receive more perks; and (v) better corporate governance can lead to more perk consumption by CEOs. Our analysis also offers insights into firms' decisions about how much autonomy they should grant to their employees. Copyright (c) 2008, RAND.

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Bibliographic Info

Article provided by RAND Corporation in its journal The RAND Journal of Economics.

Volume (Year): 39 (2008)
Issue (Month): 2 ()
Pages: 565-585

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Handle: RePEc:bla:randje:v:39:y:2008:i:2:p:565-585

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References

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Citations

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Cited by:
  1. Joon Song, 2008. "Perks: Contractual Arrangements to Restrain Moral Hazard," Economics Discussion Papers 650, University of Essex, Department of Economics.
  2. Martin Grossmann & Markus Lang & Helmut Dietl, 2011. "Why Taxing Executives' Bonuses Can Foster Risk-Taking Behavior," Working Papers 0150, University of Zurich, Institute for Strategy and Business Economics (ISU), revised May 2012.
  3. Helmut Dietl & Martin Grossmann & Markus Lang & Simon Wey, 2010. "Incentive Effects of Bonus Taxes in a Principal-Agent Model," Working Papers 0140, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Feb 2012.
  4. Pattarin Adithipyangkul & Ilan Alon & Tianyu Zhang, 2011. "Executive perks: Compensation and corporate performance in China," Asia Pacific Journal of Management, Springer, vol. 28(2), pages 401-425, June.
  5. Hammermann, Andrea & Mohnen, Alwine, 2012. "Who Benefits from Benefits? Empirical Research on Tangible Incentives," IZA Discussion Papers 6284, Institute for the Study of Labor (IZA).

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