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Nonprofit Executive Pay as an Agency Problem: Evidence from U.S. Colleges and Universities

55 Pages Posted: 11 Dec 2012 Last revised: 31 Mar 2015

Brian D. Galle

Georgetown University Law Center

David I. Walker

Boston University School of Law

Date Written: August 1, 2013


We analyze the determinants of the compensation of private college and university presidents from 1999 through 2007. We find that the fraction of institutional revenue derived from current donations is negatively associated with compensation and that presidents of religiously-affiliated institutions receive lower levels of compensation. Looking at the determinants of contributions, we find a negative association between presidential pay and subsequent donations. We interpret these results as consistent with the hypotheses that donors to nonprofits are sensitive to executive pay and that stakeholder outrage plays a role in constraining that pay. We discuss the implications of these findings for the regulation of nonprofits and for our broader understanding of the pay-setting process at for-profit as well as nonprofit organizations.

Keywords: executive compensation, managerial power, agency costs, universities, higher education, 501(c)(3), nonprofits, private inurement, warm glow compensation

JEL Classification: G30, H25, I29, J33, K22, K34, L31

Suggested Citation

Galle, Brian D. and Walker, David I., Nonprofit Executive Pay as an Agency Problem: Evidence from U.S. Colleges and Universities (August 1, 2013). 94 Boston University Law Review 1881 (2014); Boston Univ. School of Law, Law and Economics Research Paper No. 14-72; Boston College Law School Legal Studies Research Paper No. 279. Available at SSRN: or

Brian Galle (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

David Walker

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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