What Drives High Executive Pay?

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When discussions break out about executive compensation in the nonprofit sector, it always makes me stop and sigh. I do think that some executives are paid at too high a rate, but mostly what irks me is that there is no connection between high rates of pay and performance. This is hardly an issue that is exclusive to the nonprofit sector, of course.

We know from scads of research done over the past few years that executive pay is affected by gender, but I have always been surprised at how many people do not know the two major variables for extremely high executive pay in nonprofits: the first is budget size, which is no surprise; but the second, which fewer know about, is the availability of spare cash—the liquid cash flow in the agency.

Today we are running the article “What Drives Executive Compensation,” by Peter Frumkin and Elizabeth Keating, which details research findings on the correlates to high executive compensation in the nonprofit sector.

And then there is this more recent article, which links higher executive compensation to higher levels of narcissism. And additionally, there are Jon Ronson’s musings about the correlation between the CEO position in large corporations and psychopathology. I am not sure if this is sector specific …but I diverge.

We would, as always, love to hear your thoughts on the topic.