Managing multinational corporations through compensation: The risk-sharing contract method

摘要

This paper presents a mechanism that supports the flows of resources between subsidiaries of multinational companies. The mechanism is based on a risk-sharing contract between the HQ and the subsidiary manager. The model is built on the assumption that there are two alternative supervisory methods for promoting the flow of resources: incentives and direct monitoring. Analysis of the model leads to several interesting results, including some situations in which the manager of a subsidiary will be overcom-pensated. Another result indicates that as the distance between the home country and the host country increases, the incentive to the subsidiary manager increases.