Windjam

Complements and substitutes in 2 places in the Corporate Governance reading:

1. Stocks/stock options and performance bonuses are COMPLEMENTS to one another because the former rewards long term performance and the latter rewards short term performance.

2. Implicit and explicit incentives are SUBSTITUTES. If you have more explicit incentives in place, no need for so much implicit incentives. If the threat of them losing their job is high, then you wouldn't need to throw money and stock options at them to motivate them to do a good job.



Edited 1 time(s). Last edit at Monday, May 30, 2011 at 10:41AM by CFAtime.