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Does Stakeholder Outrage Constrain Executive Compensation? Evidence from the Determinants of University President Pay

By Brian D. Galle and David I. Walker

Abstract

We analyze the determinants of the compensation of private college and university presidents from 1999 through 2007. We find that the fraction of institutional revenue derived from current donations is negatively associated with compensation and that presidents of religiously-affiliated institutions receive lower levels of compensation. Looking at the determinants of contributions, we find a negative association between presidential pay and subsequent donations. We interpret these results as consistent with the hypotheses that donors to nonprofits are sensitive to executive pay and that stakeholder outrage plays a role in constraining that pay. We discuss the implications of these findings for the regulation of nonprofits and for our broader understanding of the pay-setting process at for-profit as well as nonprofit organizations

Topics: Business Organizations Law, Education Law, Law and Economics
Publisher: Digital Commons @ Boston College Law School
Year: 2012
OAI identifier: oai:lawdigitalcommons.bc.edu:lsfp-1416
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