Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper argues that the presence of both profit-based and stock price-based components in compensation contracts provides senior managers the incentive to optimally allocate effort to both implementing previously devised strategies that provide current profits and to formulating new strategies that create shareholder value. If managers are concerned about their reputation and if outcomes of strategy implementation are more informative about their ability than outcomes of strategy formulation, compensation based only on profit will incent managers to boost their reputation by over-allocating effort to strategy implementation. To restore the balance the contract needs to contain some stock-based compensation.