The Salary Mechanism Design Of The Project Manager Under Bilateral Moral Hazard

With the increasingly fierce competition of the engineering construction mar-ket,engineering project manager plays a more and more important role in the sur-vival and development of the construction enterprise.How to motivate engineering project manager's enthusiasm,arouse his potential in the work and increase en-gineering project output,is one core issue that a construction enterprise faces.A reasonable and effective salary mechanism is one powerful tool to stimulate engi-neering project manager to work harder.The design of a salary mechanism for the engineering project manager under double moral hazard is studied in this paper.The following four parts are investigated under double moral hazard in this paper.Firstly,the design of a salary mechanism for the engineering project man-ager under complete information is studied.The salary mechanism models with the project manager's effort observable and unobservable are built,and the op-timal salary mechanism are obtained under the two different cases.Then the impacts of the manager's effort information on the optimal salary mechanism and construction enterprise's profits are analyzed.Secondly,the design of the salary mechanism for engineering project manager under private information is consid-ered.The salary mechanism models are established when the effort of the engi-neering project manager is observable and unobservable,then we solve the models by the variational method and obtain the optimal salary mechanism under the two different scenarios,and analyze the impacts of the manager's effort information on optimal salary mechanism and construction enterprise's profits.Thirdly,the effects of double moral hazard on the optimal salary mechanism and construction enterprise's profits under complete and private information are analyzed,respec-tively.The conclusions show that the double moral hazard will reduce the bonus of the salary contract and increase the profits of the construction enterprise in spite of complete information or private information.Finally,basing on the actual cases,we analyze the disadvantages of the existing salary mechanism in the con-struction enterprise,and put forward some reasonable suggestions on the reform of the existing salary mechanism applying the conclusions of this paper.This paper provides a theoretic basis and reference for construction enter-prise to make a salary mechanism for engineering project manager,and plays an important role for construction enterprise's development.