Managerial Pay and Governance in American Nonprofits

This article examines the compensation of top managers of nonprofits in the United States using panel data from tax returns of the organizations from 1992 to 1996. Studying managers in nonprofits is particularly interesting given the difficulty in measuring performance. The article examines many areas commonly studied in the executive pay (within for-profit firms) literature. It explores pay differences between for-profit and nonprofit firms, pay variability within and across nonprofit industries, managerial pay and performance (including organization size and fund raising) in nonprofits, the effect of government grants on managerial pay, and the relationship between boards of directors and managerial pay in nonprofits

Reciprocally Interlocking Boards of Directors and Executive Compensation

Is executive compensation influenced by the composition of the board of directors? About 8% of chief executive officers (CEOs) are reciprocally interlocked with another CEO—the current CEO of firm A serves as a director of firm B and the current CEO of firm B serves as a director of firm A. Roughly 20% of firms have at least one current or retired employee sitting on the board of another firm and vice versa. I investigate how these and other features of board composition affect CEO pay by using a sample of 9,804 director positions in America\u27s largest companies. CEOs who lead interlocked firms earn significantly higher compensation. Also, interlocked CEOs tend to head larger firms. After controlling for firm and CEO characteristics, the pay gap is reduced dramatically. However, when firms that are interlocked due to documented business relationships are considered not interlocked, the measured return to interlock is as high as 17%. There also is evidence that the return to interlock was higher in the 1970s than in the early 1990s

[Review of \u3ci\u3ePay without Performance: The Unfulfilled Promise of Executive Compensation\u3c/i\u3e]

[Excerpt] Every once in a while someone comes out with an important book concerning corporate governance or executive compensation. Like Aldolf A. Berle and Gardiner C. Means\u27s The Modern Corporation and Private Property (New York: Harcourt, Brace, and World, 1932) and Graef S. Crystal\u27s In Search of Excess: The Overcompensation of American Executives (New York: W.W. Norton, 1991), Bebchuk and Fried\u27s new book is thought-provoking and interesting. It is a very important book and should be read not just by those interested in executive pay or corporate governance but by anyone interested in how corporations work

The Gender Gap in Top Corporate Jobs

Using the ExecuComp data set, which contains information on the five highest-paid executives in each of a large number of U.S. firms for the years 1992–97, the authors examine the gender compensation gap among high-level executives. Women, who represented about 2.5% of the sample, earned about 45% less than men. As much as 75% of this gap can be explained by the fact that women managed smaller companies and were less likely to be CEO, Chair, or company President. The unexplained gap falls to less than 5% with an allowance for the younger average age and lower average seniority of the female executives. These results do not rule out the possibility of discrimination via gender segregation or unequal promotion. Between 1992 and 1997, however, women nearly tripled their participation in the top executive ranks and also strongly improved their relative compensation, mostly by gaining representation in larger corporations

‘When Unions Mattered\u27: Assessing the Impact of Strikes on Financial Markets: 1925-1937

This examination of the Stock Market’s responsiveness to strikes looks specifically at strike actions that labor historians generally view as the major ones occurring in the United States in the years 1925–37. The authors find that strikes had large, negative effects on industry stock value. Longer strikes, violent strikes, strikes in which unions “won,” industry-wide strikes, strikes that led to union recognition, and strikes that led to large wage increases were associated with larger negative share price reactions than were other strikes. Much of the “news” generated by the typical strike seems to have been registered by the Stock Market very early in the strike. However, there were also some fairly large stock price reactions to news that could be fully revealed only at the end of a strike

Are Formal Corporate News Announcements Still Newsworthy? Evidence from Three Decades of U.S. Data on Earnings, Splits, and Dividends

This paper considers the share price reaction to dividend, earnings, and stock split announcements over a 30 year period. It first considers whether there is differential information content in similar corporate news announcements for different types of firms. Second, it investigates whether the value of news information about these firms has declined over time (has become “less newsworthy”). We categorize firms into groups by whether corporate news announcements regarding the firms will be more valuable to the public. For example, since the public may know more about larger firms, we expect the market to react less strongly (in absolute value) to new information from large firms. We find strong support for this idea. We find little evidence that is consistent with the idea that “news is less newsworthy” over the past few decades. Although, we do find that the share price reaction to “good” dividend news has become less positive and to “bad” dividend news has become less negative over time, no such related evidence exists for stock splits and earnings announcements. Additional investigation of entire distributions of returns using kernel density estimators also rejects the “news is no longer newsworthy” idea

Executive Compensation in American Unions

[Excerpt] Studying compensation in the non-profit sector is difficult. In non-profit organizations, it is not always clear what the objectives of the organization are and, therefore, perhaps even more difficult to consider how to compensate managers. This paper investigates the determinants of executive compensation of leaders of American labor unions. We use panel data on more than 75,000 organization-years of unions from 2000 to 2007 to investigate these issues. We specifically concentrate on two issues of importance to unions – the level of membership and the wages of union members. Both measures are strongly related to compensation of the leaders of American labor unions, even after controlling for organization size and individual organization fixed-effects. Additionally, the elasticity of pay with respect to membership for unions is very similar to elasticity of pay with respect to employees in for-profit firms over the same period

ILR Impact Brief - CEOs and Layoffs: Sometimes the CEO Suffers Similar Fate

Mass layoffs have become an all too familiar occurrence in the United States; statistics indicate that an average of 5.7% of all employees lose their jobs in a typical year. And while many cutbacks were once meant to be temporary – that is, until demand picked up or the plant was retooled for a new model or new product – these days they more often have a permanence intended to reduce costs and boost efficiency. Companies may expect certain outcomes from workforce realignments, such as higher profits and greater productivity, but sometimes the future of the company’s chief executive is also at stake. Previous academic studies have found links between CEO tenure and company performance. For example, researchers have shown that the probability of management turnover decreases as a company\u27s stock price increases. In a slight variation on this theme, researchers have also shown that CEO resignations/firings tend to rise as a company’s prospects deteriorate. This particular study goes a step further and explores the relationship between layoff announcements (another indicator of company performance) and chief executives\u27 term in office

The Value of Stock Options to Non-Executive Employees

This study empirically investigates the value employees place on stock options using information from the option exercise behavior of individuals. Employees hold options for another period if the value from holding them and reserving the right to exercise them later is higher than the value of exercising them immediately and collecting a profit equal to the stock price minus the exercise price. This simple model implies the hazard describing employee exercise behavior reveals information about the value to employees of holding options another time period. We show the parameters of this model are identified with data on multiple option grants per employee and we apply this model to the disposition of options received in the 1990s by a sample of over 2000 middle-level managers from a large, established firm outside of manufacturing. Exercise behavior is modeled using a random effects probit model of monthly exercise behavior that is estimated using simulated maximum likelihood estimation methods. Our estimates show there is substantial heterogeneity (observed and unobserved) among employees in the value they place on their options. Our estimates show most employees value their options at a value greater than the option's Black-Scholes value.

Executive Compensation in American Unions (CRI 2009-007)

Studying compensation in the nonprofit sector is difficult. In nonprofit organizations, it is not always clear what the objectives of the organization are and, therefore, perhaps even more difficult to consider how to compensate managers than in the for-profit sector. This paper investigates the determinants of executive compensation of leaders of American labor unions. We use panel data on more than 75,000 organization-years of unions from 2000 to 2007. We specifically concentrate on two issues of importance to unions – the level of membership and the wages of union members. Both measures are strongly related to the compensation of the leaders of American labor unions, even after controlling for organization size and individual organization fixed-effects. Additionally, the elasticity of pay with respect to membership for unions is very similar to the elasticity of pay with respect to employees in for profit firms over the same period