Paying for Staying: Managerial Contracts and the Retention Motive

Ellingsen, Tore; Kristiansen, Eirik Gaard

doi:10.2139/ssrn.2033122

Download This Paper

Open PDF in Browser

Add Paper to My Library

Paying for Staying: Managerial Contracts and the Retention Motive

NHH Dept. of Economics Discussion Paper No. 8/2012

36 Pages Posted: 2 Apr 2012

See all articles by Tore Ellingsen

Tore Ellingsen

Stockholm School of Economics - Department of Economics; Norwegian School of Economics (NHH) - Department of Economics

Eirik Gaard Kristiansen

NHH Norwegian School of Economics; Norwegian School of Economics (NHH) - Department of Economics

Date Written: March 20, 2012

Abstract

Talented managers may leave the firm in order to work elsewhere. Focusing on the portability of managers-resources, we develop a model in which managerial compensation is designed to prevent inefficient departure. The model rationalizes the widespread use of flat salaries in combination with performance-vesting stock options and is consistent with observed differences in compensation contracts across individuals, firms, industries, and countries.

Suggested Citation: Suggested Citation

Ellingsen, Tore and Kristiansen, Eirik Gaard, Paying for Staying: Managerial Contracts and the Retention Motive (March 20, 2012). NHH Dept. of Economics Discussion Paper No. 8/2012, Available at SSRN: https://ssrn.com/abstract=2033122 or http://dx.doi.org/10.2139/ssrn.2033122