This paper examines how a firm’s degree of vertical integration influences the design of executive performance measurement systems. Building on the theory of the “metering problem” in team production (Alchian and Demsetz, 1972), we argue that operating across vertically related product markets reduces contracting frictions with supply chain partners, thereby lowering noise in the focal firm's financial performance and increasing the informativeness of accounting metrics. Consistent with this view, we find that both the sensitivity of executive pay to accounting earnings and the reliance on accounting-based metrics in compensation contracts increase with the extent of vertical integration. These effects are more pronounced when firms have weaker bargaining power relative to their supply chain counterparts and when adjacent vertical markets exhibit lower earnings volatility. Our findings highlight vertical integration as an important organizational determinant of performance measurement efficiency and contribute to the management accounting literature by showing how firm boundaries complement the use of accounting-based incentives.