Explain how firms may design a compensation scheme to reduce short-termism by combining reward instruments such as stocks, stock options, restricted stocks and inside debt. Justify your proposal by referring to the academic literature.
1) Explain the short-termism hypothesis, critically explain whether principal-agent issues may contribute to short-termism, and explore its consequences for firm performance; 2) Analyse how modern firms seek to deal with the principal-agent problem. Your analysis should explicitly distinguish between the level and structure of pay. 3) Explain how firms may design a compensation scheme to […]