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


  • We thank Ralph Walkling, Francie Ostrower, Elizabeth Boris, two anonymous referees and the Editor for helpful comments as well as seminar participants at Villanova University and Drexel University. We thank Luciana Costa, Won Yong Kim, Farhad Omeyr, and Jason Varghese for helpful research assistance. We also thank the Urban Institute for data. A good portion of the research was done while Harrison was a visiting scholar at The Urban Institute.

Corresponding author: John Nutie and Edie Dowdle Associate Professor of Finance, Department of Finance and Economics, Mississippi State University, 316-A McCool Hall, Mississippi State, MS 39762; Phone: (662) 325-6716; Fax: (662) 325-1977; E-mail:


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.