Objective versus Subjective Performance Indicators in Incentive Contracts ∗ (preliminary and incomplete)

Abstract

Theoretical and empirical studies on managerial incentives have increasingly pointed to the role of subjective, non-verifiable performance indicators. Murphy and Oyer (2003) note that nearly two-thirds of the companies in their sample base bonuses, in part, on subjective assessments of individual performance. In contrast to the explici