Serial CEOs' Incentives and the Shape of Managerial Contracts

摘要

This paper analyzes the optimal contracting consequences of a recent phenomenon in the managerial labor market, CEO job hopping. I show that when the managerial labor market is thin and growth opportunities are relatively low, the optimal contract rewards the CEO for past performance through a bonus. Nevertheless, the CEO takes a long horizon in selecting corporate strategies. If growth opportunities improve, but opportunities for job hopping remain limited, the optimal contract must include restricted-equity-like claims, but overall compensation does not increase. When the managerial labor market provides more opportunities for job hopping, large differences in the structure of executive contracts emerge. It is still optimal to offer a bonus contract, even though the manager selects ineffcient short-term strategies, if growth opportunities are expected to be weak. If, instead, growth opportunities are perceived to be relatively strong, an increase in longterm equity compensation drives a surge in the overall CEO compensation. I show that, under these conditions, the optimal contract may include non-restricted equity even though themain problem is managerial retention in the intermediate period. Finally, I argue that the mechanisms highlighted in the model can explain both the surge in U.S. CEO compensation and the large differences in the level and structure of managerial compensation across countries and across firms within a country.