Nonprofit human services revenue performation and chief executive officer pay: An investigation of executive compensation and revenue performance

This study sought to determine if organizational revenue as a proxy for performance is related to CEO compensation in large human services nonprofit organizations. Publicly available revenue and salary tax data from GuideStar.org was used. Regression analysis showed that organizational revenue had a significant positive impact on CEO salary in human services organizations. The null hypothesis that there is no relationship between organizational revenue and CEO salary was rejected. Effect size results for the significant findings ranged from weak to medium, which may limit their practical significance. Due to the low percentage of explained variance, or predictive power (R2) in the model between revenue and CEO salary of 11%, it was assumed that variables outside the model represented the other 89% of explained variance. Results verified that revenue, in addition to other moderating variables outside the model in this study, might be considered with other performance evaluation tools in evaluating CEO performance. This study also investigated the relationship between revenue growth and several formulas for salary change. Even thought the study found a significant relationship between revenue growth and salary, the relatively weak practical significance and low predictive power of the model, using several iterations of revenue growth to salary scenarios, failed to provide a strong argument for a deterministic relationship between these variables and failed to corroborate previous research on this topic. The findings from this study suggest a need to expand the conceptual framework developed in this study with other important variables for future longitudinal studies of the deterministic relationship between revenue and salary and the endurance of these effects over time. This knowledge could inform nonprofit boards in establishing CEO goals and rewarding CEO behavior.