Adam Smith Business School

Dr Ilona Babenko, Arizona State University

"Regulating CEO Pay: Evidence from the Nonprofit Revitalization Act"
Wednesday, 17 May, 2 pm
Wards Library, Main Building

Abstract

This paper examines CEO pay at nonprofits. Using compensation data for 14,765 nonprofits, we find that CEO pay dropped by 2-3% when new legislation adopted in New York reduced the ability of CEOs to influence their own pay. Despite cuts in pay, CEOs exerted more effort after the legislation. Further, nonprofit performance improved, as reflected in larger donor contributions, more volunteers, and other metrics. We show that these results are consistent with the predictions of a simple agency model with compensation rigging. Overall, our results suggest that regulation that targets the pay-setting process can be effective at improving organizational outcomes.

Bio

Ilona Babenko is an associate professor of finance at the W. P. Carey School of Business. Professor Babenko’s research and teaching interests are in compensation design, insider trading and information economics, corporate financing and payout policies, real options, and political activism of corporations.

Before joining W. P. Carey, Professor Babenko was an assistant professor of finance at the Hong Kong University of Science and Technology. She has also taught finance classes at New Economic School (Russia), Bocconi University (Italy), and VGSF Business School (Austria). She received her bachelor’s degree in physics from Belarus State University, her master’s degree in physics from the University of Minnesota, and her PhD in finance from the University of California, Berkeley.

Professor Babenko has published articles in academic and practitioner journals, including the Journal of Finance, Review of Financial Studies, Management Science, Harvard Business Review, and Journal of Financial and Quantitative Analysis, and her work has featured in media outlets, such as New York Times, USA Today, Washington Post, and Forbes. She also serves as an associate editor in the Journal of Corporate Finance.

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First published: 18 April 2023