This book proposes a revised theory of agency, drawing on ideas from behavioural economics and built on more robust assumptions about human behaviour than the standard principal-agent model. The book proposes new design principles for executive pay, but also explains the difficulties in changing current executive pay practices.

This book studies the performance of incentives in executive compensation across many dimensions of CEO performance. It begins with an overview of incentives and unintended consequences, then focuses on the theory of incentives as applied to compensation generally, and as applied to executive compensation particularly. Subsequent chapters explore different facets of executive compensation and assess the evidence on how well incentive compensation performs in each arena.