I consider a repeated principal-agent setting in which the agent repeatedly chooses between hidden “long-term” and “short-term” actions. Relative to the long-term action, the short-term action boosts output today but hurts output tomorrow. The optimal contract inducing long-term actions provides a fresh perspective on upward sloping pay scales, severance pay and high-watermark contracts. The my...

We analyze the implications of short-selling and margin purchase constraints for management compensation and portfolio optimization under moral hazard. First, looking at the manager’s problem, we show that her active portfolio (that is, net of the benchmark) will not be independent of the benchmark design. We solve analytically for the benchmark composition that maximizes e¤ort expenditure. Ana...

Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges This paper provides evidence on how executive compensation relates to firm performance in listed firms in China. Using comprehensive financial and accounting data on China’s listed firms from 1998 to 2002, augmented by unique data on executive comp...

We define annual shareholder meetings as contentious if a significant fraction of shareholders are expected to vote against management’s recommendation on one or more of the items on the ballot, a signal that shareholders are increasing their monitoring activity. Using a sample of almost 28,000 meetings between 2003 and 2012, we examine stock returns over the period between the proxy filing and...

New Evidence on the Motherhood Wage Gap Using data from the 1979 National Longitudinal Survey of Youth, we assess the role of employment-based health insurance offers in explaining the motherhood wage gap. Researchers have been aware of the existence of a motherhood gap for many years; yet, the literature has failed to address the role of non-wage compensation in explaining the motherhood wage ...

Unions, Training, and Firm Performance: Evidence from the British Workplace Employee Relations Survey This paper uses a combination of workplace and matched-employee workplace data from the British 1998 Workplace Employee Relations Survey to examine the impact of unions and firm-provided training (incidence, intensity/coverage, and duration) on establishment performance. The performance effects...

While a stated goal of minimum wage increases is to benefit low-income workers, some employers are not obligated to provide at least minimum wages to all employees. U.S. farm employers comprise one of these groups. Employees of large farms and H2-A workers (temporary nonimmigrant workers lawfully admitted to perform temporary or seasonal agricultural services) are protected by minimum wage legi...

Sorting, Incentives and Risk Preferences: Evidence from a Field Experiment The, often observed, positive correlation between incentive intensity and risk has been explained in two ways: the presence of transaction costs as determinants of contracts and the sorting of risk-tolerant individuals into firms using high-intensity incentive contracts. The empirical importance of sorting is perhaps bes...

The Peter Principle: An Experiment The Peter Principle states that, after a promotion, the observed output of promoted employees tends to fall. Lazear (2004) models this principle as resulting from a regression to the mean of the transitory component of ability. Our experiment reproduces this model in the laboratory by means of various treatments in which we alter the variance of the transitory...

Other-Regarding Preferences and Performance Pay – An Experiment on Incentives and Sorting Variable pay not only creates a link between pay and performance but may also help firms in attracting the more productive employees (Lazear 1986, 2000). However, due to lack of natural data, empirical analyses of the relative importance of the selection and incentive effects of pay schemes are so far thin...