Managerial Compensation Schemes with Informed Principals

Thomas von Ungern-Sternberg

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: The paper studies managerial compensation schemes for suituations, where the current management knows more about the company's expected profitability than the new employee. When a manager is offered a contract with only a low fixed salary but high profit participation, he will be afraid that the company's profit outlook may be quite bad. Employers are aware of this. In Equilibrium the high profit employers will offer their new managers high fixed salaries and low profit participations.

Keywords: informed principal; incentive contracts; profit participation (search for similar items in EconPapers)
JEL-codes: D2 D82 (search for similar items in EconPapers)
Pages: 16 pages
Date: 1996-02
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Published in Revue Suisse d'Economie politique et de Statistique, vol. 136 (4), 2000, pp. 499-512

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Journal Article: Managerial Compensation Schemes with Informed Principals (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:9605

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