The Pricing of Relative Performance Based Incentives for Executive Compensation
推导了高管相对绩效激励的定价公式，发现英国公司用相对绩效替代绝对绩效时，会降低薪酬成本、增加投资风险，并避免提供过高激励。
Since 1995, more than 50 percent of the firms in the FTSE ‐100 have granted rewards to their senior executives, the payoffs of which are contingent on the firm’s stock return relative to a bench mark return over a given period (hereafter, relative performance incentives). This paper investigates and derives closed‐form solutions for a class of relative performance incentives that have a positive payoff if, in addition to the traditional contingencies, the firm’s stock return is higher than the market return times a threshold. Results suggest that UK firms, in practice, when relative performance incentives (RPI’s) substitute absolute performance incentives (API’s) tend to (i) decrease the cost of their compensation packages; (ii) undertake more risky capital‐investment projects; and (iii) avoid providing so high‐powered incentives to increase shareholder wealth.