Editing Principal–agent problem (section)

===Empirical evidence===
There is however considerable [[empirical evidence]] of a positive effect of compensation on performance (although the studies usually involve "simple" jobs where aggregate measures of performance are available, which is where piece rates should be most effective). In one study, Lazear (1996) saw productivity rising by 44% (and wages by 10%) in a change from salary to piece rates, with a half of the productivity gain due to worker selection effects. Research shows that pay for performance increases performance when the task at hand is more repetitive, and reduces performance when the task at hand requires more creative thinking.<ref>{{cite book |title=Drive: The Surprising Truth about What Motivates Us |first=Daniel H. |last=Pink |year=2009 |location=New York |publisher=Riverhead Books |isbn=9781594488849 |url-access=registration |url=https://archive.org/details/drivesurprisingt00pink_0 }}</ref>

Furthermore,<ref>{{cite journal |last1=Haubrich |first1=Joseph |title=Risk Aversion, Performance Pay, and the Principal-Agent Problem |url=https://www.journals.uchicago.edu/doi/pdf/10.1086/261931 |journal= Journal of Political Economy |year=1994 |volume=102 |issue=2 |pages=258–276 |doi=10.1086/261931 |s2cid=15450754 |access-date=29 October 2020}}</ref> formulated from their studies that compensation tend to have an impact on performance as a result of risk aversion and the level of work that a CEO is willing to input. This showed that when the CEO returned less effort then the data correlated a pay level of neutral aversion based on incentives. However, when offered incentives the data correlated a spike in performance as a direct result.

Conclusively, their studies indicated business owner (principal) and business employees (agents) must find a middle ground which coincides with an adequate shared profit for the company that is proportional to CEO pay and performance. In doing this risk aversion of employee efforts being low can be avoided pre-emptively.

* Paarsch and Shearer (1996) also find evidence supportive of incentive and productivity effects from piece rates, as do Banker, Lee, and Potter (1996), although the latter do not distinguish between incentive and worker selection effects.
* Rutherford, Springer and Yavas (2005) find evidence of agency problems in residential real estate by showing that real estate agents sell their own houses at a price premium of approximately 4.5% compared to their clients' houses.
* Fernie and Metcalf (1996) find that top British jockeys perform significantly better when offered percentage of prize money for winning races compared to being on fixed retainers.
* McMillan, Whalley and Zhu (1989) and Groves et al. (1994) look at Chinese agricultural and industrial data respectively and find significant incentive effects.
* Kahn and Sherer (1990)find that better evaluations of white-collar office workers were achieved by those employees who had a steeper relation between evaluations and pay.
* Nikkinen and Sahlström (2004) find empirical evidence that agency theory can be used, at least to some extent, to explain [[financial audit]] fees internationally.
* Piezunka and Grohsjean (2023) theorize (and provide corresponding empirical evidence from the [[Video game industry]]) that organizations sometimes enter interorganizational relationship that foster the careers of the organization's employees, but undermines the performance of the organizations products.<ref>{{Cite journal |last=Piezunka |first=Henning |last2=Grohsjean |first2=Thorsten |date=2023 |title=Collaborations that hurt firm performance but help employees’ careers |url=https://sms.onlinelibrary.wiley.com/doi/10.1002/smj.3447 |journal=Strategic Management Journal |language=en |volume=44 |issue=3 |pages=778–811 |doi=10.1002/smj.3447 |issn=1097-0266|doi-access=free }}</ref>  
* There is very little correlation between performance pay of CEOs and the success of the companies they manage.<ref>{{cite journal |journal= Journal of Political Economy |url= https://www.jstor.org/stable/2937665 |title=Performance Pay and Top-Management Incentives |last1=Jensen |first1=M. C. |last2=Murphy |first2=K. J. |date= 1990 |volume= 98 |issue= 2 |pages= 225–264 |doi= 10.1086/261677 |jstor= 2937665 |url-access= subscription }}</ref>