The informativeness principle states that a contract should depend on informative signals. This paper studies how it should do so. Signals indicating that the output distribution has shifted to the left (e.g., weak industry performance) reduce the threshold for the manager to be paid; those indicating that output is a precise measure of effort (e.g., low volatility) decrease high thresholds and increase low thresholds. Surprisingly, “good” signals of performance need not reduce the threshold. Applying our model to performance-based vesting, we show that performance measures should affect the strike price, rather than the number of vesting options, contrary to practice.

中文翻译：

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绩效信号应该如何影响合约？

信息性原则指出，合同应依赖于信息性信号。本文研究了它应该如何做到这一点。表明产出分布向左移动的信号（例如，行业表现不佳）降低了经理获得报酬的门槛；那些表明产出是努力的精确度量（例如，低波动性）的人降低了高阈值并提高了低阈值。令人惊讶的是，性能的“好”信号不需要降低阈值。将我们的模型应用于基于绩效的归属，我们表明绩效衡量应该影响行使价，而不是归属选项的数量，这与实践相反。