Deferred Compensation in Nonprofit Organizations: A Path to Financial Stability

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Abstract

This study examines the determinants of deferred pay for nonprofit CEOs and the relationship of deferred compensation to financial stability in nonprofit organizations. We find that several organizational (e.g., size and leverage) and governance (e.g., pay policy) factors are associated with earning and/or the proportion of CEO deferred compensation. We also find that deferred compensation is more common for CEOs who receive larger base salaries (relative to the organization’s size) and bonus compensation. After creating matched samples, we find evidence of a positive relationship between the percentage of CEO total compensation that is deferred and future organizational stability, including higher reserves, more revenue diversity, and greater profitability. Results indicate that deferred compensation within a nonprofit CEO’s total compensation package can encourage a long-term stability focus, which may achieve certain stakeholder-desired objectives.

Authors

• Linda M Parsons, University of Alabama-Tuscaloosa

• Laurie Corradino, Colorado State University - Pueblo