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Mandatory Disclosure of Managerial Contracts in Nonprofit Organizations

Author

Listed:
  • Kopel, Michael
  • Marini, Marco A.
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 fundraising 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.

Suggested Citation

  • Kopel, Michael & Marini, Marco A., 2020. "Mandatory Disclosure of Managerial Contracts in Nonprofit Organizations," 2030 Agenda 308022, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemgc:308022
    DOI: 10.22004/ag.econ.308022
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Community/Rural/Urban Development;

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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