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Customer Satisfaction and Future Financial Performance Discussion of are Nonfinancial Measures Leading Indicators of Financial Performance? An Analysis of Customer Satisfaction

Richard A. Lambert
Journal of Accounting Research 1998 36, 37
Richard A. Lambert, Customer Satisfaction and Future Financial Performance Discussion of are Nonfinancial Measures Leading Indicators of Financial Performance? An Analysis of Customer Satisfaction, Journal of Accounting Research, Vol. 36, Studies on Enhancing the Financial Reporting Model (1998), pp. 37-46

Balancing Performance Measures

Srikant Datar; Susan Cohen Kulp; Richard A. Lambert
Journal of Accounting Research 2001 39(1), 75-92
This paper uses an agency theory model in which the agent's actions are multi‐dimensional to analyze the optimal weights to apply to performance measures in a compensation contract. We show how the optimal contract trades off the congruity of the overall performance measure with the desire to minimize the risk imposed upon the agent. In contrast to the single action case, we find that an increase in the sensitivity of a performance measure to an agent's action does not necessarily increase the weight placed on that performance measure, even if that measure is perfectly congruent with the firm's outcome.