How to Design a Good Manager Compensation Scheme
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Executive multi-metric compensation schemes that combine earnings with stock returns and other (non-earnings) targets foster executive multi-optimization efforts and mitigate manipulative earnings management incentives. This is the main finding of a new paper written by Francesca Franco of the Bocconi Department of Accounting and Oktay Urcan of the University of Illinois at Urbana-Champaign that has been recently featured on the CLS Blue Sky Blog on Corporate Governance, the blog on corporations and the capital markets of the prestigious Columbia Law School.