Misaligned Agents

How should firms select and incentivize managers who allocate resources based on private information when performance is measured asymmetrically across dimensions? We show that firms optimally hire managers whose preferences are biased toward poorly measured dimensions. This allows high-powered incentives on well-measured dimensions while relying on managerial preferences to prevent neglect of poorly-measured dimensions. This framework can explain apparent inconsistencies between organizations' stated objectives and the explicit incentives they provide, such as why ESG-committed firms provide weak ESG-based compensation while hiring ESG-motivated CEOs.