Regulating CEO Pay: Evidence from the Non-Profit Revitalization Act

Finance & Accounting

Speaker:Ilona Babenka, Arizona State University
Date: Wednesday 21 October 2020
Time: 16:00 - 17:00
Location: Zoom

Further details

Using executive compensation data for more than 14,500 nonprofi t organizations during 2009-2017, we find that CEO pay drops by 2% when new legislation adopted in New York decreases the power of CEOs to bargain over their pay. Despite cuts in pay, CEOs do not exert lower effort after the legislation's passage, measured by the number of hours they work per week. Further, nonprofi t performance generally improves, as reflected in larger donor contributions, more volunteers, and greater revenues per employee. Overall, our results show that regulation that targets the pay-setting process can be effective at reducing CEO pay while improving organizational outcomes.