薪酬管理外文文献翻译.doc

The existence of an agency problem ina corporation due to the separation of ownership and control has been widely studied in literatures. This paper examines the effects of pensation schemes on corporate investment decisions. This paper is significant because it helps to understand the relationship between them. This understandings allow the design of an optimal pensation scheme to induce the manager to act towards the goals and best interests of pany. Grossman and Hart (1983) investigate the principal agency problem. Since the actions of the agent are unobservable and the first best course of actions can not be achieved, Grossman and Hart show that optimal pensation scheme should be adopted to induce the manager to choose the second best course of actions. Besides pensation schemes, other means to alleviate the agency problems are also explored. Fama and Jensen (1983) suggest two ways for reducing the agency problem: competitive market mechanisms and direct contractual provisions. Manne (1965) argues that a market mechanism such as the threat ofa takeover provided by the market can be used for corporate control. "Ex-post settling up" by the managerial labour market can also discipline managers and induce them to pursue the interests of shareholders. Fama (1980) shows that if managerial labour markets function properly, and if the deviation of the firm's actual performance from