Are Top Management Teams Compensated as Teams? A Structural Modeling Approach

• 成果类型: Article
• 署名作者: Li, Chen
• 署名单位: New York University; NYU Shanghai
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.4982
• 发表日期: 2024
• 关键词: Moral hazard; TOP MANAGEMENT TEAM; Executive compensation; structural model

摘要

I develop two empirical models to quantify agency friction caused by moral hazard in top management teams. They capture shareholders' distinct perspectives on compensating top managers: the Individual Model, in which managers in a firm unilaterally shirk, and the Team Model, in which managers choose effort jointly. The Team Model rationalizes observed compensation better than the Individual Model, underlining the importance of managerial coordination and team -based incentives. This paper also offers novel estimates of agency friction in a team production setting. Risk premium explains a large portion of the pay differential across and within firms. Firm value would have dropped between 4% and 15% if managers shirked. Additional counterfactual estimation suggests that shareholders could reduce the total compensation by up to $17 million if they were to switch from the individual perspective to the team perspective.