Private Compensation and Organizational Design

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Publication statusPublished - 26 Aug 2021

Conference

TitleThe 48th Annual Meeting of the European Finance Association
LocationVirtual from Milan
PlaceItaly
Period25 - 27 August 2021

Abstract

Most of the literature on organizational design and incentives assumes public contracting. Yet most real world compensation contracts are private information, observed only by their direct signatories. This matters when agents work together to produce a joint output, because they care about each others’ incentives. In this case, the principal can gain from designating one agent “team leader,” with authority to decide, and hence observe, all the bonuses. Such “outsourcing” of contracting is never optimal with fully public contracts. With private contracts, by contrast, it raises effort by reassuring agents that the incentives provided are sufficiently strong; but it distorts effort allocation, as the team leader takes too much of the compensation budget. Even when observability is held constant, pay delegation can raise output by skewing bonuses towards more productive agents. 

Bibliographic Note

Since this conference is yet to commence, the information for this record is subject to revision. Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

Private Compensation and Organizational Design. / BUFFA, Andrea M.; LIU, Qing; WHITE, Lucy.

2021. Paper presented at The 48th Annual Meeting of the European Finance Association, Italy.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review