Board Chair–CEO Relationship, Board Chair Characteristics, and Nonprofit Executive Compensation

Abstract

We examine the associations between board chair–CEO relationship, board chair characteristics, and top executive compensation in U.S. nonprofit organizations. Using a sample of 2,153 organization-year observations in our empirical tests, we find a significant positive association between board chair–CEO relationship and top executive compensation. We find that board chair characteristics such as tenure and gender are not significantly associated with top executive compensation. The supplementary analyses suggest that board chair–CEO relationships are positively associated with executive compensation but for only organizations with larger revenues, a bigger board, and a lower change in percentage of program expenses. The findings should be helpful in enhancing the understanding of influencing factors on nonprofit executive compensation.

Issue Introduction

“…As such, this research highlights the need for donors and nonprofits to consider short-and long-term strategic decisions, because such relationships that are created and fostered may be as important as the resources provided and consumed. Feng et al (2022) empirically analyzes a sample of 705 nonprofit organizations over five years to evaluate the relationship between board chairs and chief executive officers (CEOs) and the potential impact on nonprofit executive compensation. Although the authors find no association between board chair characteristics (such as tenure and gender) and top executive compensation, the relationship between the board chair and CEO is found to have a positive impact on executive compensation for organizations with larger revenues, bigger boards, and fewer changes in program expenses.…”