Managing multinational corporations through compensation: The risk-sharing contract method

► The paper creates a mechanism that encourages bidirectional flows of resources and knowledge between subsidiaries of a MNC. ► I use a principal agent model of a MNC that includes a HQ and two subsidiaries. ► The analytical model is based on a risk-sharing contract that penalized the manager for poor performance. ► For some parameters, managers may be overcompensated so they are paid more than the increase of profits.