Dynamic CEO Compensation

• 成果类型: Article
• 署名作者: Edmans, Alex; Gabaix, Xavier; Sadzik, Tomasz; Sannikov, Yuliy
• 署名单位: University of Pennsylvania; New York University; Princeton University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2012.01768.x
• 发表日期: 2012
• 页码: 1603-1647
• 关键词: optimal incentive contracts; continuous-time; executive-compensation; limited-liability; security design; STOCK; principal; RISK; pay; PROVISIONS

摘要

We study optimal compensation in a dynamic framework where the CEO consumes in multiple periods, can undo the contract by privately saving, and can temporarily inflate earnings. We obtain a simple closed-form contract that yields clear predictions for how the level and performance sensitivity of pay vary over time and across firms. The contract can be implemented by escrowing the CEOs pay into a Dynamic Incentive Account that comprises cash and the firms equity. The account features state-dependent rebalancing to ensure its equity proportion is always sufficient to induce effort, and time-dependent vesting to deter short-termism.