Regulatory and Life Cycle Influences on Managerial Incentives: I. Introduction

An important controversy persists in economics concerning the appropriateness of profit maximization as opposed to various competing nontraditional theories of the firm [13]. Of particular interest has been the comparative relevance of the sales maximization hypothesis suggested by Baumol [4] and others. A typical methodology employed to empirically analyze the profit versus sales maximization issue has been to question whether the financial rewards of top executives are more strongly influenced by corporate profit or sales performance. It is implicitly assumed that the firm has a well-defined set of organizational goals and that the structure of executive compensation is designed to provide executives with a consistent set of...