Determinants and Consequences of Nonprofit CEO Incentive Pay

• In Event: Government and Nonprofit

Abstract

Using compensation data available from the redesigned Form 990 Schedule J, we test the determinants and consequences of bonus in the nonprofit sector. Specifically, we study the types of nonprofit organizations using bonus arrangements and the amounts of those bonuses, as well as the impact of those bonuses on nonprofit performance. We find that organizations that have higher ROA and generate more program service revenue are more likely to award bonuses and award higher levels of bonus compensation, with this affect accentuated by the existence of taxable activities and profits. We also find that both the propensity to pay a bonus as well as the level of bonus is related to both the compensation and monitoring environments of the nonprofit organization. Lastly we find that a positive association exists between the amount of the bonus and future performance, when performance is measures using ROA.

Authors

• Erica Harris, Rutgers University - Camden

• Steven Balsam, Temple University