Bengt Holmström

Bengt Holmström is the Paul A. Samuelson Professor of Economics at MIT and a 2016 Nobel Laureate in Economic Sciences (shared with Oliver Hart). He is best known for his contributions to principal-agent theory — the analysis of how contracts can be designed to align the interests of agents (employees, managers) with principals (owners, shareholders) when information is asymmetric and actions are not fully observable. His "informativeness principle" — that optimal incentive contracts should use all available signals that provide information about the agent's effort — became foundational for both theoretical and practical compensation design. Holmström's work on the multi-task principal-agent problem showed why strong performance incentives on measurable tasks can crowd out effort on unmeasurable but important activities — a result with profound implications for compensation design in banking, management, and public sector employment. He also served on the Nokia board, applying corporate governance insights to practice.