Sep 21, 2007

Articles in journals

Barros, C., Nunes, F

34

16

Purpose-This paper analyzes the pay and performance of CEOs in Portuguese non-profit organizations (NPOs), focusing on the role played by the economic performance of the organization, together with that played by the structure of the Board and the individual characteristics of the manager. If the CEO can influence the board structure, agency problems arise, which in turn allow the CEO to extract rent and demand compensation in excess of the equilibrium level. Design/Methodology/Approach - An OLS-ordinary least squares model and an IV-Instrumental variable models are estimated for comparative purposes. The IV permits to account for endogenous variables in the regression. Findings - It is concluded that governance is important in the Portuguese non-profit sector. Several variables affect the CEO-Chief Executive Officer, namely, organization performance variables, board composition variables and individual variables. This result highlights the urgent need for a code of governance practice to be introduced in this sector. Moreover, the paper integrates human capital in the definition of the earnings, concluding that this also contributes to earnings. Research Limitations/Implications - This paper has two limitations. The first is related to the data set and the second with the method adopted. With the reference to the data set, the span is limited and therefore the generalisation of this result is questionable. A larger data span is needed to confirm the present results. Relative to the method, the OLS is unable to handle endogeneity variables in a regression. The IV can overcome this result, but some critics to this method have appear recently, when there are heterogeneous across subjects and LIV- local instrumental variables are needed, Heckman (1999). Practical implication- A governance code should be adopted, involving NPO managers in their definition. A regulatory agency that will be the watch dog of the process should be implemented to enforce the modernisation of Portuguese NPO. Originality of the paper - This is the first paper analysing governance issues on Portuguese NPO and the second paper at European level on NPO governance. It clarifies two issues, the absence of governance principles in Portuguese NPO and the need of a regulatory agency in this context.

Portugal,Non-profit,CEO-compensation,Board structure,Governance,