Board Composition, Committees, and Organizational Efficiency: The Case of Nonprofits

Callen, Jeffrey L.; Klein, April; Tinkelman, Daniel

doi:10.1177/0899764003257462

Cited by 224 publications

(219 citation statements)

References 33 publications

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“…In such case, no improvement will be found. Although empirical research by Callen and Falk (1993) did not reveal that board composition significantly influenced the board' s technical or allocating efficiency, Callen, Klein, and Tinkelman (2003) found that an increase in the proportion of major donors on the board lowered the proportion of administrative expenses to total expenses and raised the proportion of program expenses to total expenses.…”

Section: Caers Du Bois Jegers De Gieter Schepers Pepermansmentioning

confidence: 95%

Principal-agent relationships on the stewardship-agency axis

Caers

Bois

Jegers

et al. 2006

Nonprofit Management Leadership

151

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T HIS ARTICLE PROVIDES an overview of the literature on nonprofit principal-agent relationships. It depicts the nature of agency theory and stewardship theory, analyzes the origin of their struggle within the nonprofit structure, and marks directions for a conciliatory approach.Note: We gratefully acknowledge Scott Gassler, Bruno Heyndels, the three anonymous reviewers, and editor Roger Lohmann for their constructive comments.

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Section: Caers Du Bois Jegers De Gieter Schepers Pepermansmentioning

confidence: 95%

Principal-agent relationships on the stewardship-agency axis

Caers

Bois

Jegers

et al. 2006

Nonprofit Management Leadership

151

119

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“…In support of fundraising success as criteria for NPO effectiveness, Callen [19] postulates that fund raising expenditures are equivalent to advertising expenditures in the corporate sector. Despite administration and fund raising, Callen, Klein and Tinkelman [20] found that there is a correlation between governance and efficiency in NPOs, thereby confirming that NPO governance issues are criteria for the determination of effectiveness. Major donors assess the effectiveness of NPOs based on the composition of their Board [17].…”

Section: Organisational Effectiveness For Non-profit Institutionsmentioning

confidence: 97%

Determinants of Sustainability and Organisational Effectiveness in Non-Profit Organisations

et al. 2015

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This case study investigates the criteria for organizational effectiveness in non-profit organizations (NPOs) with the aim to determine how the elements of sustainability fit within the criteria. To achieve this, the study utilized the research questions: "what criteria do NPOs use to evaluate their effectiveness?" and "how is sustainability embedded in NPO effectiveness?" The research design was interpretivist, adopting focus group interviews to obtain data. Specifically, two focus group interviews were held with the top management of an NPO which revealed that both financial and non-financial criteria were equally essential for NPO effectiveness. This finding is consistent with the literature, although it contradicts the initial assumption of the study that NPO effectiveness was based more on non-financial criteria than financial criteria. The study also found that the effectiveness of an NPO should be viewed in two ways: firstly, "the full achievement of its mandate" and, secondly, "the ability to run business projects to cover cost." It also emerged that both the ability to cover costs and the achievement of a mandate should be done in a sustainable manner (a sustainable manner is seen as one that is harmonious with the natural and the socio-political environment). The results of this paper present a practical case for the management of NPOs by reiterating that the full achievement of the NPO mandate and the successful running of social projects to generate funds for sustainability are key elements of effectiveness. Given the essential role that NPOs play in developing countries, this study has OPEN ACCESS Sustainability 2015, 7 9561 provided the foundation for more widespread enquiry into the sustainability and effectiveness of NPOs.

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“…This program expense ratio measures the efficiency with which total expenses are made toward production of the charitable good (programs) instead of being used for fundraising and administration. The program expense ratio is a widely used measure of efficiency in NFPs (e.g., Weisbrod and Dominguez, 1986;Posnett and Sandler, 1989;Tinkelman, 1998 and1999;Baber, Daniel and Roberts, 2002;Krishnan, Yetman and Yetman, 2004), and has been used in prior studies examining the relation between governance quality and NFP performance (e.g., Callen, Klein, and Tinkelman, 2003;Desai and Yetman, 2005). If excess endowments signal better monitoring, we expect a positive, or no, relation between excess endowments and the program expense ratio.…”

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confidence: 99%

Agency Problems of Excess Endowment Holdings in Not-for-profit Firms

2004

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We examine three alternative explanations for excess endowments in not-for-profit firms: (1) growth opportunities, (2) monitoring, or (3) agency problems. Inconsistent with growth opportunities, we find that most excess endowments are persistent over time, and that firms with persistent excess endowments do not exhibit higher growth in program expenses or investments. Inconsistent with better monitoring, program expenditures toward the charitable good are lower for firms with excess endowments, and CEO pay and total officer and director pay are greater for firms with excess endowments. Overall, we find that excess endowments are associated with greater agency problems. Agency problems of excess endowment holdings in not-for-profit firms AbstractWe examine three alternative explanations for excess endowments in not-for-profit firms:(1) growth opportunities, (2) monitoring, or (3) agency problems. Inconsistent with growth opportunities, we find that most excess endowments are persistent over time, and that firms with persistent excess endowments do not exhibit higher growth in program expenses or investments. Inconsistent with better monitoring, program expenditures toward the charitable good are lower for firms with excess endowments, and CEO pay and total officer and director pay are greater for firms with excess endowments. Overall, we find that excess endowments are associated with greater agency problems. JEL classification: G31; G35; G38; J33; L31Keywords: Corporate governance; Not-for-profit; Cash holdings; Endowment; Agency problems 1 IntroductionNot-for-profit firms often maintain large endowments, and the determinants and consequences of this unusual feature have received little study. An endowment is a fund of cash and/or securities that the not-for-profit can use to finance current and future expenses. The purpose of this paper is to examine whether there are agency problems when not-for-profit firms (NFPs) hold excess endowment assets.1We use as a basis of our study the literature that explores agency problems related to cash holdings in for-profit firms (e.g., Jensen, 1986 (2002) argues that donors serve an important monitoring role in NFPs and minimize agency costs. In addition, some of the more frequently cited cash-related agency problems in forprofit firms, such as excessive risk-reducing acquisitions, are likely to be less prevalent in 1 From this point forward, we use the acronym NFP in place of "not-for-profit." In this paper, we use the terms "not-for-profit" and "nonprofit" as synonyms.2 not-for-profit firms. NFP managers may have weaker incentives to engage in riskreducing activities because less of their wealth is concentrated in firm-specific assets (i.e., the future compensation of both nonprofit and for-profit managers has a firm-specific element, but for-profit managers also have a large proportion of their wealth invested in firm-specific stock and options).On the other hand, cash-related agency problems are potentially exacerbated in We examine endowments in a broad sample o...

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Board Composition, Committees, and Organizational Efficiency: The Case of Nonprofits

Cited by 224 publications

References 33 publications

Principal-agent relationships on the stewardship-agency axis

Principal-agent relationships on the stewardship-agency axis

Determinants of Sustainability and Organisational Effectiveness in Non-Profit Organisations

Agency Problems of Excess Endowment Holdings in Not-for-profit Firms

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