Performance Pay and Top Management Incentives

  title={Performance Pay and Top Management Incentives},
  author={Kevin J. Murphy and Michael C. Jensen},
  journal={Microeconomic Theory eJournal},
  • Kevin J. Murphy, Michael C. Jensen
  • Published 1990
  • Economics, Business
  • Microeconomic Theory eJournal
  • Our estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth. Although the incentives generated by stock ownership are large relative to pay and dismissal incentives, most CEOs hold trivial fractions of their firms' stock, and ownership levels have declined over the past 50 years. We hypothesize that public and private political forces impose… CONTINUE READING
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