expertise and informational advantages over the owners of the firm. Additionally, within the parameters of the absentee principal, it is assumed that the agent’s output is observable, but his or her effort is not. Accordingly, one of the principal’s problems is to determine the level of compensation awarded the agent that properly correlates with the agent’s output as an observable signal. The agent, on the other hand, selects a level of effort in accordance with the compensation scheme and the agent’s own personal goals that may interface imperfectly with those of the principal