Guido Bongioanni

Relative Performance Evaluation (RPE) is a feature of executive compensation that evaluates a manager’s performance relative to peer firms. Economic theory predicts that, under sufficient risk sharing between managers and shareholders, firms that adopt RPE should engage in more aggressive product-market conduct (i.e. charge lower prices). However, the extent of RPE adoption and its market effects remain disputed: firm disclosures often reference RPE, yet managers’ pay shows little correlation with competitors’ performance despite its well-documented sensitivity to market-wide shocks. We study the adoption and product-market effects of RPE using a network oligopoly model (Pellegrino, 2025) with ultra-realistic managerial incentives, disciplined by granular data from over 350,000 executive compensation contracts. We find that RPE is widespread in form but limited in substance: pay remains tied mainly to absolute objectives, and relative performance is typically benchmarked against broad stock-market indices rather than close rivals. These adoption patterns substantially dampen RPE’s competitive impact, reconciling the seemingly contradictory evidence. Counterfactual simulations indicate that stronger, rival-based RPE could enhance competition and consumer welfare, but such effects remain modest under current practices.

Governments often need to choose which sectors deserve priority when industrial policy cannot support everything at once. Rankings are one way to make that choice explicit. This note ranks sectors using distortion centrality: a production-network measure that gives higher priority to sectors where a policy wedge, bottleneck, or productivity improvement would have larger effects through input-output linkages. The question is whether sectors that look most important from a national perspective are also the sectors that matter most for the EU as a whole. Using Eurostat FIGARO, we build a 2010–2023 panel of EU27 country-sectors and compare national distortion-centrality rankings with EU-wide rankings. EU-wide priorities are very stable, but they are not the same as national priorities. Adjacent-year EU-wide rank correlations average 0.992, while the average national-versus-EU percentile-rank gap is 0.262. For policy, national rankings identify domestic bottlenecks; EU-wide rankings identify sectors whose importance comes from cross-border supply-chain links.