Each April, it is common to find news articles contrasting executive pay with firm performance. For example, on April 9, 2009, The Wall Street Journal reported that the top three executives at Kilroy Realty (a California property developer and manager) were paid the “highest amount permitted by their compensation agreement in 2008” although occupancy rates declined and share prices fell 39 percent in 2008 and 41 percent (as of the time of the article) in 2009. Why might a firm pay managers high compensation although performance is worsening?