Design of Compensation Contract Based on Relative Performance Evaluation Considering Headquarters’Attention

In the conglomerate, subsidiary's executive always has unique information and different interests which deviate from headquarters' intention. In order to alleviate this contradiction between the principal-agent relations, we construct a compensation contract model based on three-dimension relative performance evaluation. The model could accurately evaluate executive's actual performance by eliminating interference from external environment, corporate headquarters' attention and subsidiary's existent resource. Finally, the mathematical results and application example show that the extended compensation contract could improve incentive efficiency by introducing other enterprises' performance in the industry, other subsidiaries' performance in the conglomerate, and its own history performance.