AVERSION TO THE VARIABILITY OF PAY AND THE STRUCTURE OF EXECUTIVE COMPENSATION CONTRACTS
Bibliographic record
Abstract
This paper presents a new implication of an aversion toward the variance of pay (“risk aversion”) for the structure of managerial incentive schemes. In a principal-agent model in which the effort of a manager with mean-variance preferences affects the mean of a performance measure, we find that managerial compensation must be such that the variance of payments is decreasing in effort. From an ex-ante perspective, which is relevant for effort inducement, this maximizes the rewards associated to high effort, and the punishments associated to low effort. An important practical implication is that convex incentive contracts do not satisfy this necessary condition for optimality, which calls into question the practice of granting executive stock options. The paper therefore contributes to the debate on the efficiency of executive compensation.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.007 | 0.036 |
| Meta-epidemiology (narrow) | 0.000 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.001 | 0.003 |
| Scholarly communication | 0.005 | 0.004 |
| Open science | 0.001 | 0.002 |
| Research integrity | 0.002 | 0.003 |
| Insufficient payload (model declined to judge) | 0.003 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".