Nonprofit Executive Incentive Pay

51 Pages Posted: 16 May 2015 Last revised: 16 Dec 2016

See all articles by Steven Balsam

Steven Balsam

Temple University - Department of Accounting

Erica Harris

Rutgers, The State University of New Jersey - Rutgers University, Camden

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Date Written: April 14, 2015

Abstract

We utilize information only recently disclosed on Form 990 to examine the use and consequences of incentive pay at nonprofit organizations. While not used as frequently as in for-profit firms, bonuses are common in nonprofits, as we observe them in approximately 44 percent of our firm-year observations. We find that bonuses are positively associated with profitability, competition, firm size, available cash, and use of compensation consultants and committees; while negatively related to board oversight and charitable nature. However, our results suggest that donors look unfavorably at the payment of bonuses, as donations are negatively associated with prior year bonuses. Nonetheless, we find evidence consistent with the payment of bonuses incentivizing nonprofit executives as, despite reduced contributions, future performance is positively associated with bonus compensation.

Keywords: nonprofit, executive pay, bonus pay

Suggested Citation

Balsam, Steven and Harris, Erica, Nonprofit Executive Incentive Pay (April 14, 2015). Fox School of Business Research Paper No. 15-063. Available at SSRN: https://ssrn.com/abstract=2606427 or http://dx.doi.org/10.2139/ssrn.2606427

Steven Balsam

Temple University - Department of Accounting ( email )

306 Speakman Hall
Philadelphia, PA 19122
United States
215-204-5574 (Phone)
215-204-5587 (Fax)

HOME PAGE: http://www.sbm.temple.edu/~drb/

Erica Harris (Contact Author)

Rutgers, The State University of New Jersey - Rutgers University, Camden ( email )

Camden, NJ 08102
United States

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