Compensation Policy and the
Nature of the Firm
At this point we've discussed the incentive problems induced
by the benchmark compensation contract and how adding various provisions
to the benchmark contract can overcome those problems. The question becomes,
"For what types of firms are the incentive problems associated with
the benchmark contract most problematic?" Alternatively, how do we
expect the contract provisions found in employment contracts to vary across
firms?
|
Firm Characteristic |
Level of Compensation |
Use of Incentive Compensation |
| Size | ? | ? |
| Growth Options |
? |
? |
| Credence Goods |
? |
? |
| Product Warranties |
? |
? |
| Future product support |
? |
? |
| Supplier financing |
? |
? |
| Closely held firm |
? |
? |
| Regulation |
? |
? |
| Marg. corp. tax rate |
? |
? |
| Marg. personal tax rate |
? |
? |
What about tax motives?
What's the evidence?