Matthew Bloomfield, Catarina Marvão, Giancarlo Spagnolo, 09 October 2020

Theory suggests that the use of relative performance evaluation in managerial compensation should be widespread, but the evidence shows that this is not the case. This column argues that the potential for executives to seek to improve their relative standing by employing costly sabotage – for example, in the form of overly aggressive product market strategies – is an important deterrent to firms' use of relative performance evaluation. Explicit collusion mitigates this possibility, thereby facilitating more efficient risk-sharing between shareholders and executives.

Yanhui Wu, 03 March 2018

Performance-related pay is commonly linked to the surging incomes of top managers over recent decades. This column presents a theory to assess the role of incentive structures in sorting labour to achieve efficiency on the one hand, and in generating wage inequality on the other. The theory offers a new perspective for studying the effects of technological progress on both the wages and employment of various groups of individuals.

Brian Bell, John Van Reenen, 05 August 2016

Lacklustre growth seems to be the new normal almost everywhere in the world except for one area – CEO pay. This column uses data on UK publicly listed firms to examine whether weak governance leads to pay rises for CEOs that are not justified by performance. CEO pay asymmetry – pay responding more to increases in firm performance than to decreases – appears to occur mainly in firms with a low share of institutional owners able to exert external control. CEOs at such firms are also more likely to be paid for ‘luck’, with pay rises rewarding random positive shocks unrelated to performance.

Niklas Bengtsson, Per Engström, 28 October 2014

Critics of the ‘audit society’ and the so-called ‘new public management’ doctrines have gained momentum in recent years. At the centre of the critique is the so-called motivation crowding-out hypothesis. This column presents evidence from a field experiment involving Swedish non-profits. Far from crowding out intrinsic motivation, the threat of an audit improved all aspects of efficiency.

Derek Neal, Gadi Barlevy, 08 October 2011

Should teachers be on performance-related pay? Will it bring out the best in their abilities and, it is hoped, the children they are educating? What is the best way to measure such performance? This column presents a new proposal for teacher wages: Pay for Percentile.

Bruno S. Frey, Margit Osterloh, 26 September 2011

As the bonus culture in the financial sector once again comes under attack, this column challenges the typical defence that banks need to pay top dollar to attract the best talent.

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