Are Perks Purely Managerial Excess?

47 Pages Posted: 28 May 2004 Last revised: 6 Mar 2022

See all articles by Raghuram G. Rajan

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Julie Wulf

Harvard Business School

Date Written: May 2004


A widespread view is that executive perks exemplify agency problems -- they are a route through which managers misappropriate a firm’s surplus. Accordingly, firms with high free cash flow, operating in industries with limited investment prospects, should offer more perks, and firms subject to more external monitoring should offer fewer perks. The evidence for agency as an explanation of perks is, at best, mixed. Perks are, however, offered in situations in which they enhance managerial productivity. While we cannot rule out the occasional aberration, and while we have little to say on the overall level of perks, our findings suggest that treating perks purely as managerial excess is incorrect.

Suggested Citation

Rajan, Raghuram G. and Wulf, Julie M., Are Perks Purely Managerial Excess? (May 2004). NBER Working Paper No. w10494, Available at SSRN:

Raghuram G. Rajan (Contact Author)

University of Chicago - Booth School of Business ( email )

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Julie M. Wulf

Harvard Business School ( email )

Harvard Business School
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United States

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