Incentive Pay Schemes: Navigating the Principal-Agent 
Dilemma for Optimal Firm Performance

Chulin Mai*

doi:10.70711/memf.v2i4.5382

Incentive Pay Schemes: Navigating the Principal-Agent Dilemma for Optimal Firm Performance

Chulin Mai*

Abstract

This paper examines the challenges of designing incentive pay schemes to mitigate the Principal-Agent problem, focusing on the
balance between aligning interests and managing information asymmetries. It discusses the potential of such schemes to boost productivity
and efficiency but also warns of the consequences of misaligned incentives. Using McDonalds as a case study, the paper explores successful
incentive models and contrasts them with common pitfalls in both corporate and everyday settings. The abstract concludes by underscoring
the need for careful incentive design to achieve optimal firm performance.

Keywords

Incentive Pay Schemes; Principal-Agent Problem; Performance; Incentives Alignment

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References

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DOI: http://dx.doi.org/10.70711/memf.v2i4.5382

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