Discretion in managerial bonus pools
Author(s)
Bibliographic Information
Discretion in managerial bonus pools
（Foundations and trends in accounting / editor-in-chief, Stefan J. Reichelstein, v. 5,
Now, c2011
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Note
Originally published as Foundations and trends in accounting, v. 5, issue 4 (2010)
Includes bibliographical references (p. 73-76)
Description and Table of Contents
Description
Discretion in Managerial Bonus Pools synthesizes and integrates a growing literature that has emerged over the past 10-15 years on the use of both objective and subjective performance indicators in managerial incentive plans. The authors examine the structure of efficient bonus pools (fixed payment schemes) in the presence of subjective performance indicators. The analysis covers a range of scenarios including single- and multi-agent settings, the interplay of objective and subjective indicators and short-term as opposed to long-term contracting relations.
To synthesize the existing research, the authors frame their exposition around five recurring themes which collectively speak to the structure and the efficiency of incentive schemes based on subjective information i. Value of Subjective Performance Indicators. ii. Incremental Agency Cost. iii. Compression of Optimal Incentive Contracts. iv. Optimality of Proper Bonus Pools. v. Value of Multiperiod Contracting.
Table of Contents
1. Introduction. 2. Incentive Contracting with a Single Agent. 3. Incentive Contracts with Multiple Agents. 4. Multiple Periods. 5. Conclusion. Appendix. References.
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