The Governance of Not-for-Profit Firms

62 Pages Posted: 21 May 2002

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2002

Abstract

Many factors including incentive-pay, powerful shareholders, and takeover threats push for-profits managers towards maximizing shareholder value. One of the most striking factors about non-profit firms is that they have no comparable governance institutions, and the only check on managers are boards that are themselves rarely responsible to anyone outside the firm. This essay discusses the implications of these weak governance institutions on non-profit behavior. A primary implication is that non-profits will often evolve into organizations that resemble workers' cooperatives. The primary check on this tendency is the need of the organizations to compete in outside markets. After presenting a model of non-profit behavior, I look at four different sectors (hospitals, museums, universities and the church). All display significant signs of capture by elite workers, but all still perform their basic missions reasonably, probably because of market competition.

Suggested Citation

Glaeser, Edward L., The Governance of Not-for-Profit Firms (April 2002). Harvard Institute of Economic Research Paper No. 1954. Available at SSRN: https://ssrn.com/abstract=313203 or http://dx.doi.org/10.2139/ssrn.313203

Edward L. Glaeser (Contact Author)

Harvard University - Department of Economics ( email )

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