Executive Compensation in the Nonprofit Sector

An examination of executive compensation in the nonprofit sector indicates that, as in the for-profit sector, the salaries of nonprofit executive directors depend heavily upon the organization's size. Among nonprofits, both ideology and the composition of revenues substantially affect executive compensation levels. The results of this study indicate broad differences across segments of the nonprofit sector and a strong role for ideology in the setting of compensation.     

A Focus on the Program of All-Inclusive Care for the Elderly (PACE)

For over four decades, the Program of All-Inclusive Care for the Elderly (PACE) has been operated by nonprofit organizations. Research has demonstrated that nonprofit PACE provides quality, cost-effective community-based care to older adults who would otherwise require a nursing home level of care. Recently, the U.S. Secretary of the Department of Health and Human Services has authorized for-profit entities to operate PACE, contingent on their ability to demonstrate that they can provide care that is similar to nonprofit PACE with regard to access to care, quality of care, and cost-effectiveness. In 2013, a study was conducted to evaluate how PACE operates under for-profit versus nonprofit status. The results were presented to Congress which, in turn, authorized for-profit PACE providers. This article critiques the 2013 study, offers a comparison to for-profit hospice, and argues that at best there is not enough evidence to conclude that for-profit PACE provides the same quality of care as existing nonprofit operators.     

Strengthening Social Protection in East Asia,Mukul G. Asher and Fukunari Kimura (Eds.)

Few studies have analyzed for-profit and nonprofit differences in the home health care sector. Using data from the National Home and Hospice Care Survey, we found that patients in nonprofit agencies were more likely to be discharged within 30 days under Medicare cost-based payment compared to patients in for-profit agencies. However, this difference in length of enrollment did not translate into meaningful differences in discharge outcomes between nonprofit and for-profit patients, suggesting that—under a cost-based payment system—nonprofits may behave more efficiently relative to for-profits. These results highlight the importance of organizational and payment factors in the delivery of home health care services.     

The validity of supplementary pay systems in nonprofit organizations

The theory and assumptions used by nonprofit organizations when adopting employee incentive pay systems are examined in this article. A theory to explain the use of financial incentive is described. This theory states that nonprofit employees are motivated, like employees in the for-profit sector, to seek financial rewards contingent on achieving certain performance goals. To validate the Theory, a review of select literature is provided.     

Understanding the Compensation of Nonprofit Executive Directors: Examining the Influence of Performance and Organizational Characteristics

In this study we aimed to provide a better understanding of executive compensation in nonprofit organizations. We examined factors including organizational size, market, subsector, organizational type, staffing level, and organizational performance as potential influences driving variation across the nonprofit sector. The models utilize data on the population of nonprofit organizations required to file Form 990 returns with the Internal Revenue Service in order to broadly examine compensation. The results indicate associations between various measures of performance and compensation in nonprofit orga‐nizations and also suggest that different types of nonprofits may be sensitive to different measures of performance.     

Changing Relationships Between Nonprofit and For-profit Human Service Organizations Under the Long-Term Care System in Japan

In Japan, a nonprofit organization system enacted in the late 1990s and the later introduction of privatization policies in human services were expected to overturn government dominance of nonprofit organization activities. By focusing on the long-term care insurance (LTCI) system, which privatized public human services for the first time in the country, this study empirically examines whether, and to what extent, nonprofit–government relationships in Japan have actually changed as a result of this new system. In addition, because LTCI newly allows for-profit organizations to provide services, the influence of such organizations were incorporated into the analysis. The outcomes of this study demonstrate that the government continues to extend its sphere of influence over nonprofit and for-profit organizations through LTCI. In addition, for-profit organizations appear to be more successful than nonprofit organizations, in that the former organizations have overcome their lack of experience as public service providers by taking over the roles that nonprofit organizations have traditionally occupied.     

COLLECTION SALES: GOOD OR BAD FOR JOURNALS?

This article discusses the impact of collection sales (i.e., the bundling of several journals for sale by publishers to libraries) on journals. The advent of electronic journal distribution implies that bundling is an efficient sales strategy and can act to extend the reach of a journal. Current arrangements are discussed and shown to lead to tensions between commercial publishers and nonprofit journals. The article argues that nonprofit journals should not necessarily abandon collection sales programs. Rather, nonprofit journals may benefit from withdrawing from commercial publishers which distribute their own for-profit journals, and joining together to be distributed by less commercial publishers who set relatively low prices for their collections. ( JEL D82, L31, L42, L82)     

The growth of the nonprofit sector in the 1980s: Facts and interpretation

The nonprofit sector was the growth sector of the 1980s. This is the conclusion reached from detailed examination of the growth trends of major industry groups in New York State in the years 1981 through 1987. The analysis in this article suggests that the growth of the nonprofit sector was due primarily to the strong orientation of the economy toward services, where the nonprofit sector has traditionally had an important presence. Within service industries as a whole, the nonprofit and for-profit sectors grew at comparable rates; however, nonprofit growth was concentrated in semipublic services and in services where information is often difficult for consumers to acquire and understand, while the for-profit sector grew in simpler and more privately oriented services. The analysis shows that the nonprofit sector filled much of the gap left by reduced or stagnating government services. However, the growth of the nonprofit sector may be difficult to sustain in the future if sufficient entrepreneurial talent and other resources are not forthcoming.     

Profits and incentive compensation in nonprofit firms

Incentive contracts based on profit sharing, cost reduction, or other measures of performance no longer need to endanger a nonprofit firm's tax exemption; such measures have been urged for adoption in the nonprofit sector. However, the nonprofit differs from the for-profit sector in that contracts have side effects on the solicitation and offering of donations and on the character of those who choose to work in the nonprofit sector. In addition, it is more difficult in the nonprofit sector to obtain an appropriate output measure for use in calculating bonuses.     

Nonprofit and for-profit home care in Israel: clients' assessments

Clients' assessments of differences between nonprofit and for-profit organizations delivering home care services to Israel's frail elderly were studied. No significant differences were found between nonprofit and for-profit providers with respect to organizational efficiency; speed of placement and replacement of home care workers; responsiveness to clients' complaints; and supervision of care plans, schedules, and service delivery. Systematic differences were found, however, in clients' perceptions of workers employed by nonprofit versus for-profit service providers. The differences related to the home care workers' adaptation to clients' needs and wants; how well workers delivered services; and how satisfied clients were with the services received. Indications are that the relatively high efficiency of nonprofit organizations can largely be attributed to the performance of their home care workers.     

Nonprofit and For-Profit Home Care in Israel

Clients' assessments of differences between nonprofit and for-profit organizations delivering home care services to Israel's frail elderly were studied. No significant differences were found between nonprofit and for-profit providers with respect to organizational efficiency; speed of placement and replacement of home care workers; responsiveness to clients' complaints; and supervision of care plans, schedules, and service delivery. Systematic differences were found, however, in clients' perceptions of workers employed by nonprofit versus for-profit service providers. The differences related to the home care workers' adaptation to clients' needs and wants; how well workers delivered services; and how satisfied clients were with the services received. Indications are that the relatively high efficiency of nonprofit organizations can largely be attributed to the performance of their home care workers.     

Exploring Nonprofit Executive Turnover

Projections of executive turnover loom over the three sectors with aging baby boomers filling many executive‐level positions, and research into causes, outcomes, and processes of turnover are timely inquiries. Yet, scholarly attention into nonprofit executive turnover has been limited to date and has not sufficiently examined actual turnover events. To help address this gap, forty nonprofit organizations that had recently experienced executive turnover were selected from a national random sample, and the current executives participated in an interview. This qualitative data was analyzed to identify factors and dynamics that define nonprofit executive turnover. These findings both confirm practical knowledge and offer new insights relevant to future research and practitioners alike.     

The Nonprofit Sector at a Crossroads: The Case of America

Despite some encouraging trends, America's nonprofit sector stands at a crossroads because of an interrelated series of challenges. Government budget cuts beginning in the early 1980s have eliminated a significant source of nonprofit revenues and created a serious fiscal squeeze for many organizations. Although the sector as a whole managed to replace this lost revenue, it has done so largely through fees and charges that have attracted for-profit businesses into traditional fields of nonprofit action, creating a serious economic challenge to the sector. Simultaneously, important questions have been raised about the effectiveness and accountability of nonprofit organizations, and about what some see as the overprofessionalization and bureaucratization of the sector. All of this has undermined public confidence in the sector and prompted questions about the basic legitimacy of the special tax and legal benefits it enjoys. To cope with these challenges, American nonprofits could usefully undergo a process of renewal that revives the sector's basic values, reconnects it to its citizen base, and creates a better public understanding of its functions and role.     

THE NONPROFIT FIRM: A POTENTIAL SOLUTION TO INHERENT MARKET FAILURES

This article analyzes the differences in products offered by nonprofit and for-profit firms in a monopolistically competitive industry where goods are differentiated both by product attributes and by the degree to which benefits are public. Because nonprofit firms receive donations, they provide a Pareto improvement of the equilibrium product set: nonprofit firms will be less biased against goods with a high social good component than will their for-profit counterparts, hi addition, the optimal donations function which equates the nonprofit equilibrium product set to the set which maximizes societal welfare is derived.     

Facility Ownership and Resident Satisfaction with Assisted Living

Abstract

Although the majority of assisted living facilities operate as for-profit organizations and serve increasingly frail elderly populations, little is known about the impact of ownership on the quality of care in assisted living. This study examines the relationship between facility ownership and the quality of care in assisted living, using resident satisfaction as a quality indicator. The assessed aspects of satisfaction include health care, housekeeping, physical environment, relationships with staff, and social life/activities. The relationship of facility ownership to resident satisfaction is examined controlling for resident psychological well-being, functional ability, facility size, and staff resources. Data were collected in personal interviews with 156 residents, including 96 residents in eight for-profit facilities and 60 residents in five nonprofit facilities in Maryland. Residents in the sampled nonprofit facilities were more satisfied with assisted living than were residents in the for-profit facilities. In particular, residents in nonprofit facilities were more satisfied with health care, physical environment, and social life/activities in the facility. Better understanding of the relationship between facility ownership and resident satisfaction can help administrators create environments that maximize resident satisfaction in both nonprofit and for-profit facilities.     

PRODUCTION COSTS, TRANSACTION COSTS, AND LOCAL GOVERNMENT CONTRACTOR CHOICE

Local governments that choose to externally produce a service can contract with other governments, for-profit firms, or nonprofit organizations. This contractor choice is modeled as one in which the local government decision maker minimizes service delivery costs, both production and transaction costs, subject to political and fiscal constraints. The model is estimated using data on three frequently contracted health services obtained from a national survey of local government service delivery arrangements. The empirical analysis reveals the importance of both production and transaction costs, as well as the choice set of available suppliers, to contractor choice.     

Why nonprofit nursing homes pay higher nurses' salaries

It is generally agreed that nonprofit nursing homes pay higher wages to their employees, hire more staff per patient, and are thus more costly than for-profit nursing homes. We attempt to show that higher costs in nonprofit nursing homes are related to higher quality of care in these homes. Using the 1985 National Nursing Home Survey, we show that nurses in nonprofit nursing homes have different characteristics than nurses in for-profit homes and that these differences in characteristics account for the differences in wages, a finding consistent with our hypothesis concerning quality differences between types of homes.     

Principals and Agents: An Investigation of Executive Compensation in Human Service Nonprofits

This study proposes a revised agency theory for the nonprofit sector, distinguishes between the extent of agency and the extent of monitoring, and compares the magnitudes of the two impacts. Using panel data for 1998–2003, the paper tests whether monitoring by principal-stakeholders such as donors, clients, the government, and the board reduces the opportunity for executive misconduct such as extravagant spending on compensation and perquisites. Given the theory, the findings show that two effects influence CEO salaries. First, while nonprofit endowments provide a fiscal cushion in tough financial situations, by offering “organizational slack” they also increase the CEO’s opportunity to steal or raise her compensation (i.e., agency effect). Second, donors utilize monitoring mechanisms such as auditing or direct observations, which limit the opportunity for misconduct and reduce executive pay (i.e., monitoring effect). In the final analysis, the monitoring effect is greater than the agency effect, which implies that even if agency problems are present, the monitoring that donors provide offsets them.     

The Adoption of the Corporate Governance Model by Nonprofit Organizations

This article examines the circumstances under which nonprofit organizations adopt corporate governance practices. In the study reported here, the authors found that adoption of corporate governance practices depends primarily on the presence of a supportive institutional (that is, value) context as well as available resources to support governance restructuring. These findings strongly suggest that the adoption of structures and practices from the for-profit sector is neither a feasible nor even a desirable solution to problems facing many nonprofit organizations.