Nobel economics prize winners' work unlocks issues around executive pay | Larry Elliott


Oliver Hart and Bengt Holmström’s contract theory work addresses important questions of risk, incentive and reward

Economics prize awarded to Oliver Hart and Bengt Holmström

It sounds the driest of subjects, but the Nobel-prize winning work of Oliver Hart and Bengt Holmström on the theory of contracts is key to understanding some of the most contentious political issues of the age.

Take the question of how executives should be rewarded. Pay packages tend to be a mix of basic salary, bonuses and share options, with the aim of getting the best of those running companies.

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