Department of Labor Logo United States Department of Labor
Dot gov

The .gov means it's official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Principal‐Age Models of CEO Pay‐For‐Performance Relationships

David S. Kaplan


I estimate CEO pay-for-performance schedules for two purposes. First, the predictions of several agency and sorting models are tested. Second, the validity of a common observation/complaint about CEO compensation policies is examined. The principal empirical finding is that CEOs of firms that are prone to high (stock-market) performance volatility receive compensation schedules that lie entirely above the schedules of other CEOs. This shows that the high levels of pay cannot be compensation for bearing more risk. Hazard models show CEOs of high volatility firms also have lower probabilities of turnover.