The Relation Between Reported Earnings and Executive Compensation in Nonprofit Healthcare Organizations

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Abstract

This study examines the relationship between multiple components of nonprofit health care (NPHC) executive compensation and reporting earnings using a sample of 504 firm-year observations from 97 large NPHC organizations gathered from IRS 990 filings. I extend the current literature by documenting that the association between earnings (change in earnings) and NPHC executive compensation (change in NPHC executive compensation) is driven by elements of compensation more likely to be related to performance - bonuses and retirement compensation. Additional results indicate that firms with the highest levels of earnings display a significantly stronger incremental relation between reported earnings and those performance-aligned elements of NPHC executive compensation. Finally, this paper extends current NPHC literature by finding evidence that increasing numbers of independent board members act to constrain NPHC executive compensation.

Author

• George R Wilson, Valdosta State University