The structure of how managers get paid affects how risky their decisions are. When CEOs' wealth is more tied to stock price changes, they tend to make riskier choices like investing more in research and development, less in physical assets, and taking on more debt. Riskier decisions also lead to a pay structure with more emphasis on stock price changes and less on overall performance. Overall, when stock prices are more volatile, both risk-taking and pay tied to stock prices increase.