The Influence of Profit Sharing on Managers' Behavior

This paper intends to discuss the influnences on manager's efforts and payment level under the conditions of their sharing and not sharing profit when the corporation only includes the share holder and the manager. We set up a solvable principal-agent model by using validity function rather than revenue function and choosing the output probability distribution function which has the characteristics of MLRP and CDFC, The solution of model shows that higher disutility of the manager's effort will result in higher incentive wage;and more profit and higher incentive wage will lead to the manager's working harder.