We study three elements of management control: incentive compensation, performance monitoring, and delegation of authority to managers to contract with lower-level employees. Using a principal-agent model, we highlight important direct and indirect interactions between and among these endogenous control elements, themes often emphasized in the economics and accounting literatures using the analogy of a three-legged stool. We identify circumstances in which control elements are complements or substitutes and exhibit a coherent pattern of practices observed together. For instance, contrary to typical predictions that quality monitoring complements steep effort incentives, we find that when contracting authority adjusts easily to changes in firm circumstances, then both incentive pay and contracting authority substitute for monitoring quality, while incentive pay complements contracting authority. Overall, our findings suggest a number of empirical implications and generally inform a growing literature that documents the presence or absence of complementarities among management control elements.

中文翻译：

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层次结构中的权限、监控和激励*†

我们研究了管理控制的三个要素：激励薪酬、绩效监控和授权经理与下级员工签订合同。使用委托代理模型，我们强调了这些内生控制要素之间重要的直接和间接相互作用，这些主题在经济学和会计文献中经常使用三足凳的类比来强调。我们确定控制要素是互补或替代的情况，并表现出共同观察的一致实践模式。例如，与质量监控补充陡峭努力激励的典型预测相反，我们发现，当订约当局很容易适应公司环境的变化时，激励报酬和订约当局都替代了质量监控，而奖励金是对订约权的补充。总体而言，我们的研究结果提出了一些实证意义，并且通常为越来越多的文献提供信息，这些文献记录了管理控制要素之间是否存在互补性。