Boards, Executive Excess Compensation, and Shared Power: Evidence from Nonprofit Firms

27 Pages Posted: 11 Oct 2013

See all articles by Jacqueline L. Garner

Jacqueline L. Garner

Georgia Institute of Technology - Scheller College of Business

Teresa D. Harrison

Drexel University - Department of Economics & International Business

Date Written: November 2013

Abstract

We investigate how executives, the board, and excess compensation jointly affect the performance of nonprofits. Since the common measure of nonprofit performance often includes salaries, we also use expenses that directly benefit the targeted population. Our results suggest that above average compensation for executives is associated with poor firm performance. However, the negative relation of CEO pay to performance occurs for firms with only one executive, the CEO. We conclude that a powerful CEO with autonomy can harm firm performance, but other executives can mitigate these agency problems. The board also appears to monitor direct community benefits more than indirect benefits.

Keywords: nonprofit, governance, firm performance, excess compensation

JEL Classification: G34, L31

Suggested Citation

Garner, Jacqueline L. and Harrison, Teresa D., Boards, Executive Excess Compensation, and Shared Power: Evidence from Nonprofit Firms (November 2013). Financial Review, Vol. 48, Issue 4, pp. 617-643, 2013, Available at SSRN: https://ssrn.com/abstract=2338852 or http://dx.doi.org/10.1111/fire.12018

Jacqueline L. Garner (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Teresa D. Harrison

Drexel University - Department of Economics & International Business ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States

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