Executive Compensation and Regulation Imposed Governance: Evidence from the California Non-Profit Integrity Act

• Main Authors: RANASINGHE, Tharindra, Dhole, S., Khumawala, S., Mishra, S.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Accounting; Business Law, Public Responsibility, and Ethics; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/889
• Institution: Singapore Management University

This study focuses on the impact of the California Non-Profit Integrity Act (2004) on executive compensation costs in affected non-profit organizations in California. We find that, for affected organizations, executive compensation costs during post regulation periods have gone up more in comparison to a comparable group of non-profits domiciled in the State of Ohio and a group of California non-profits that were exempted from the requirements of the Act. We also find that the observed increase in compensation costs is primarily driven by relatively smaller affected organizations that are less likely to have voluntarily pre-adopted the provisions of the Act. Our findings indicate that the Act has not been effective in controlling executive compensation costs in the sector, which some commentators have termed “unreasonably large” and draw attention to some unintended and costly consequences of regulatory attempts at improving governance.