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Regulating CEO Pay: Evidence from the Nonprofit Revitalization Act

Author

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  • Ilona Babenko
  • Benjamin Bennett
  • Rik Sen

Abstract

This paper examines CEO pay at nonprofits. Using compensation data for 14,111 nonprofits, we find that CEO pay dropped by 2% after legislation in New York reduced CEOs’ ability to influence their own pay. Despite lower pay, CEOs exerted more effort, and nonprofit performance improved. The effects were stronger at commercial nonprofits than at charities and for male CEOs than female CEOs. These findings are consistent with a model where some nonprofit CEOs derive meaning from their work and compensation can be rigged. Overall, our results suggest that regulation that targets the pay-setting process can improve organizational outcomes at nonprofits.

Suggested Citation

  • Ilona Babenko & Benjamin Bennett & Rik Sen, 2026. "Regulating CEO Pay: Evidence from the Nonprofit Revitalization Act," The Review of Financial Studies, Society for Financial Studies, vol. 39(1), pages 198-252.
    • Handle: RePEc:oup:rfinst:v:39:y:2026:i:1:p:198-252.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaf077
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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