The Nobel prize for Economics goes to Oliver Hart and Bengt Ceremony, experts of the super bonus to the manager – The Republic

the ROME – The Nobel prize for Economics was awarded to the anglo-american Oliver Hart, and to the Finnish Bengt Ceremony. The two economists are experts in particular of the remuneration and benefits that go to the top managers of the companies. The choice of the Swedish Academy has displaced all of the predictions of the vigil that they favored the French Olivier Blanchard.

Born in London, class of 1948, Hart teaches at Harvard University since 1993. And’ an expert in contract theory and corporate finance. In these issues and has dedicated many essays in specialized journals, but also a book of great success: “Firms, Contracts, and Financial Structure” (Oxford University Press, 1995). As the adviser to the government, he has worked in two cases, the (Black and Decker v. Usa and WFC Holdings Corp. – Wells Fargo – v. Usa). He is a member of the Econometric Society, the American Academy of Arts and Sciences, the British Academy, the American Finance Association, and has several honorary degrees.

Bengt Ceremony, was born in Helsinki in 1949, married with a son, he is also an expert on contracts. Bachelor’s degree in Mathematics and Physics in his Country, specializations, at Stanford, has guided the Department of economic Studies at the Mit of Boston, between 2003 and 2006, and he still teaches today Economy and Management in the american university. In his curriculum, also had a long teaching at Yale.

Here are the reasons at the basis of their victory. “The winners have developed a scheme comprehensive for analyzing different issues of the architecture of the contract, such as remuneration based on the performance of the top manager, the deductions and the coretribuzioni in insurance, and the privatization of the activities of the public sector”, emphasised the jury of the royal Academy of Sweden. These theories, he said again to the jury, “you have proved to be important only for the economy but also for other areas, constitutional law and theory of solutions”. It was underlined the absolute innovative character of the theories of Hart on incomplete contracts, initiated in the years ’80.

“I’m very happy, confused and grateful”. These are the first words of the Finnish Holmstroem. Responding to a question on the topic of the bonus to the manager, the economist explained that “they are too complicated”. More in general, it is appropriate that the bonuses the managers will not be paid all at once and in a short time, but over a prolonged period of time.”

“my first reaction was to wake up my wife and wake up my youngest son”. So Oliver Hart: “I woke up at about 4:40 and I was wondering if now you were making it too late for this year, but then luckily the phone rang”.

at The end of the years ’70, Holmstroem has been shown as shareholders of a company should design an optimal contract to the ceo that you know is only part of the action, the incentives – in this scenario – are provided under the “asymmetric information”. The teaching of Finnish has explained how the contract can weigh with exactness the balance between risk and incentives. In subsequent work Holmstroem has included – in its theoretical reasoning – cash prizes, the objectives achieved by the managers and the behaviour of the individual members of a team that can take advantage of the work of other colleagues.

In the mid – ’80s, Hart is dedicated to the “incomplete contracts”. He explained, that is, how the company should handle a situation that the agreement of the employee, not the rule. The economist has also studied other subjects: in particular, what types of companies should undertake a merger, what is the right mix between debt and equity financing, and when institutions like schools or prisons should be public or private.

The two researchers will share the prize of 8 million crowns (828 thousand euro). The awards ceremony will be held in Stockholm on 10 December.