Subjective Performance Measures in Optimal Incentive Contracts

Objective measures of performance are seldom perfect. In response, incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures. This paper explores the combined use of subjective and objective performance measures in (respectively) implicit and explicit incentive contracts. Naturally, objective and subjective measures often are substitutes, sometimes strikingly so: we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible (because the firm's fallback position after reneging on an implicit contact is too attractive). We also show, however, that objective and subjective measures can reinforce each other: if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures (because the improved objective measures increase the value of the ongoing relationship, and so reduce the firm's incentive to renege). We also analyze the use of subjective weights on objective performance measures, and provide case-study evidence consistent with our analyses.

Peripheral keratometry - accuracy and reliability in comparison to a corneal topography system, for application in rigid contact lens fitting

Peripheral keratometry was once a widely used practice in optometry. The technique fell out of vogue in the mid-1960s when questions arose concerning its accuracy. In this project, the accuracy of peripheral keratometry was reevaluated on 162 normal non-contact lens-wearing eyes. The results obtained by a Reichert keratometer and a fabricated plastic peripheral fixation device were statistically compared to data obtained by the Humphreys MasterVue corneal keratoscopic mapping system. Patients were asked to fixate on a point 13mm from the center of a plastic disc overlaid onto the keratometer mire plate. The curvature value achieved with this fixation was then compared to the curvature value taken 3.0mm from the center of the corneal topographic map. Results show a high correlation(\u3e 90%) between the mid-peripheral corneal curvature data obtained with the peripheral keratometry disc and data obtained by the corneal mapping system 3.0mm from center. Results from this study also indicate that the keratometer, when used with a peripheral fixation device, can yield data just as accurate as the corneal topography system (p-value \u3e 0.05). Clinical application of this procedure could prove beneficial to the general11 optometric practitioner who fits rigid contact lenses but may not be able to afford an expensive corneal mapping system

Relative Performance Evaluation for Chief Executive Officers

Measured individual performance often depends on random factors which also affect the performances of other workers in the same firm, industry, or market. In these cases, relative performance evaluation (RPE) can provide incentives while partially insulating workers from the common uncertainty. Basing pay on relative performance, however, generates incentives to sabotage the measured performance of co-workers, to collude with co-workers and shirk, and to apply for jobs with inept co-workers. RPE contracts also are less desirable when the output of co-workers is expensive to measure or in the presence of production externalities, as in the case of team production. The purpose of this paper is to review the benefits and costs of RPE and to test for the presence of RPE in one occupation where the benefits plausibly exceed the costs: chief executive officers (CEOs). In contrast to previous research, our empirical evidence strongly supports the RPE hypothesis-CEO pay revisions and retention probabilities are positively and significantly related to firm performance, but are negatively and significantly related to industry and market performance, ceteris paribus. Our results also suggest that CEO performance is more likely to be evaluated relative to aggregate market movements than relative to industry movements.

Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence

This paper studies career concerns -- concerns about the effects of current performance on future compensation -- and describes how optimal incentive contracts are affected when career concerns are taken into account. Career concerns arise frequently: they occur whenever the market uses a worker's current output to update its belief about the worker's ability and competition then forces future wages (or wage contracts) to reflect these updated beliefs. Career concerns are stronger when a worker is further from retirement, because a longer prospective career increases the return to changing the market's belief. In the presence of career concerns, the optimal compensation contract optimizes total incentives -- the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract. Thus, the explicit incentives from the optimal compensation contract should be strongest when a worker is close to retirement. We find empirical support for this prediction in the relation between chief-executive compensation and stock-market performance.

Does Executive Compensation Affect Investment?

Investment decisions require trading off current expenditures against future revenues. If revenues extend far enough into the future, the executives responsible for designing long-run investment policy may no longer be in office by the time all the revenues are realized. We present evidence that: (1) on average, executives are close to leaving office (relative to the payout period of many investments); (2) bonuses based on accounting earnings constitute an important part of compensation for the typical executive; and (3) executives respond in predictable ways to compensation plans based on accounting measures of earnings. Based on these facts, we hypothesize that existing compensation policy induces executives to reduce investments during their last years in office. In our empirical work, however, we find that investment expenditures on research and development and on advertising tend to be largest in the final years of a CEO's time in office. We offer several possible explanations for this surprising finding

Quasilocal Thermodynamics of Dilaton Gravity coupled to Gauge Fields

We consider an Einstein-Hilbert-Dilaton action for gravity coupled to various types of Abelian and non-Abelian gauge fields in a spatially finite system. These include Yang-Mills fields and Abelian gauge fields with three and four-form field strengths. We obtain various quasilocal quantities associated with these fields, including their energy and angular momentum, and develop methods for calculating conserved charges when a solution possesses sufficient symmetry. For stationary black holes, we find an expression for the entropy from the micro-canonical form of the action. We also find a form of the first law of black hole thermodynamics for black holes with the gauge fields of the type considered here.Comment: 41 pages, latex, uses fonts provided by AMSTe

Generalized entropy and Noether charge

We find an expression for the generalized gravitational entropy of Hawking in terms of Noether charge. As an example, the entropy of the Taub-Bolt spacetime is calculated.Comment: 6 pages, revtex, reference correcte

901-90 In Vivo Genetic Engineering of Cardiac Cells: Intracoronary Administration of Antisense (AS) Oligonucleotides (ODN)

We have previously documented that transfection of antisense ODN by a highly efficient Sendai virus (HVJ)-liposome delivery system can be utilized to modify lesion formation within the peripheral vasculature in vivo. In this study, we defined the feasibility of modifying cardiac cell gene expression via a catheter-based coronary infusion of AS ODN in rabbits. The coronary artery was cannulated via an over-the-wire approach from the carotid artery. Fluorescein (F)-Iabeled ODN were utilized to evaluate the cellular distribution and kinetics of ODN uptake within the myocardium after a single intraluminal bolus of HVJ-liposomes containing ODN. Cellular uptake of F-ODN was primarily localized in the microvasculature and significant staining was also observed in conduit vessels and cardiac myocytes. Immunohistochemical analysis verified prominent localization of F-ODN within the microvascular endothelium. Expression of F-ODN was observed within 10 minutes, peaked at 1 day, and remained evident for up to one week after transfection by the HVJ-liposome method. In contrast, F-ODN infused within liposomes without the viral particle exhibited transient expression that was undetectable within 3 days. These findings indicate that a single intracoronary bolus infusion of ODN within HVJ-liposomes is a reproducible methodology for delivery of AS ODN to targeted cells within the myocardium. Future studies will characterize the feasibility of using this approach to modify cardiac structure and function via regulating myocardial cell gene expression

Statistical Mechanics of Black Holes

We analyze the statistical mechanics of a gas of neutral and charged black holes. The microcanonical ensemble is the only possible approach to this system, and the equilibrium configuration is the one for which most of the energy is carried by a single black hole. Schwarzschild black holes are found to obey the statistical bootstrap condition. In all cases, the microcanonical temperature is identical to the Hawking temperature of the most massive black hole in the gas. U(1) charges in general break the bootstrap property. The problems of black hole decay and of quantum coherence are also addressed.Comment: 21 page