Incentive Contracts and Environmental Performance Indicators
نویسنده
چکیده
A principal-agent (P-A) model is used to analyse the effect of environmental performance indicators (EPI) on environmental risk sharing within the firm. To achieve due diligence, the principal (top management), having to use imperfect performance indicators and fearing penalties for environmental damages, wants to avoid environmental harm and induce the agent (employee manipulating hazardous materials) to take appropriate action. To motivate the agent, the principal offers an incentive contract based on environmental stewardship performance (as measured by EPI). Environmental stewardship being difficult to measure, due to high levels of uncertainty surrounding EPI, creates impediments to the establishment of an efficient P-A contract.
منابع مشابه
Objective versus Subjective Performance Indicators in Incentive Contracts ∗ ( preliminary and incomplete )
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