Suppose you decide to elicit high CEO effort when and if good luck occurs by paying the bonus for $1 billion outcomes only. What criticism can you see with this incentive contract plan?
2 answers
Suppose you decide to elicit high CEO effort when and if bad luck occurs by paying the bonus for $500 million outcomes. What criticism can you see with this incentive contract plan?
What is the maximum amount it would be worth to shareholders to elicit high CEO effort all the time rather low CEO effort all the time?