Mandatory Disclosure of Managerial Contracts in Nonprofit Organizations

40 Pages Posted: 17 Dec 2020 Last revised: 21 Dec 2020

See all articles by Michael Kopel

Michael Kopel

University of Graz

Marco A. Marini

University of Rome La Sapienza; CREI, University Rome III

Multiple version iconThere are 2 versions of this paper

Date Written: December 16, 2020

Abstract

Nonprofit organizations have been recently mandated to disclose the details of their executives’ compensation packages. Contract information is now accessible not only to current and prospective donors, but also to rival nonprofit organizations competing for donations in the fundraising market. Our aim is to investigate the impact of publicly available contract information on fundraising competition of nonprofit organizations. We argue that, although such provision makes contract information available to multiple stakeholders and increases the transparency of the nonprofit sector, it also induces nonprofits to use managerial incentive contracts strategically. In particular, we find that the observability of incentive contracts relaxes existing fun draising competition. This is beneficial in terms of nonprofits’ outputs, in particular when these organizations are trapped in a situation of excessive fundraising activities. However, we show that publicly available contract information distorts nonprofits’ choice of projects, thus potentially inducing socially inefficient project clustering.

Keywords: Nonprofit Organizations, Mandatory Contract Disclosure, Fundraising Competition, Strategic Incentive Contracts, Project Clustering, Project Specialization

JEL Classification: L31, D64, F35, L13

Suggested Citation

Kopel, Michael and Marini, Marco A., Mandatory Disclosure of Managerial Contracts in Nonprofit Organizations (December 16, 2020). FEEM Working Paper No. 26.2020, Available at SSRN: https://ssrn.com/abstract=3749965 or http://dx.doi.org/10.2139/ssrn.3749965

Michael Kopel

University of Graz ( email )

Universitaetsstrasse 15 / FE
A-8010 Graz, 8010
Austria

Marco A. Marini (Contact Author)

University of Rome La Sapienza ( email )

Piazzale Aldo Moro, 5
Rome, 00181
Italy
+39 06 49910843 (Phone)

HOME PAGE: http://sites.google.com/a/uniroma1.it/marcomarini-eng/

CREI, University Rome III ( email )

Via Ostiense, 161
Rome, 00154
Italy

HOME PAGE: http://host.uniroma3.it/centri/crei/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
34
Abstract Views
161
PlumX Metrics