Fair and Square: A Retention Model of Managerial Compensation

• 成果类型: Article
• 署名作者: Ellingsen, Tore; Kristiansen, Eirik Gaard
• 署名单位: Stockholm School of Economics; Norwegian School of Economics (NHH)
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4062
• 发表日期: 2022
• 页码: 3604-3624
• 关键词: compensation contracts; retention; performance pay; RECIPROCITY

摘要

We propose a model of how the retention motive shapes managerial compensation contracts. Once employed, a risk-averse manager acquires imperfectly portable skills whose value is stochastic because of industry-wide demand shocks. The manager's actions are uncontractible, and the perceived fairness of the compensation contract affects the manager's motivation. If the volatility of profits is sufficiently large and outside offers are suffi-ciently likely, the equilibrium contract combines a salary with an own -firm stock option. The model's predictions are consistent with empirical regularities concerning contractual shape, the magnitude of variable pay, the lack of indexation, and the prevalence of discretionary severance pay.