Altruism, social norms, and incentive contract design

Abstract We study theoretically and empirically the relation between altruism incentive contract design. Theoretically, we extend Fischer Huddart (2008) to investigate how social norms reinforce managers’ altruistic preferences, thus affecting optimal design related strength performance measurement. Empirically, draw on notion of an organization’s work climate capture preferences. Using data collected from a sample 557 managers, find that in where managers are mostly out for themselves, firms have lower pay-for-performance sensitivity place greater weight aggregate measures. In addition, respondents report they engage more undesirable actions unproductive costly firm owners. contrast, care about others (including peers their organizational unit), weights At same time, supply effort less actions.