Article

Charity Watchdogs and the Limits of Information-Based Regulation

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Abstract

Transparency concerns and the concomitant accountability challenges have motivated policy and legal scholars to explore information-based regulatory approaches. We examine their usefulness in the context of the nonprofit sector which tends to show signs of governance failure. Although nonprofits are required by law to disclose information on fund use, nonprofit donors face difficulties in accessing and interpreting information about how nonprofits are deploying resources. Charity watchdogs make this information available to donors in a convenient format. In theory, this should allow donors to reward nonprofits that devote resources to service delivery and to punish those that are less careful about controlling overheads. To test the relationship between charity ratings and donations, we examine 90 nonprofits in the state of Washington for the period 2004–2007. Drawing on ratings data provided by Charity Navigator, we find that changes in charity ratings tend not to affect donor support to these nonprofits. We explore this statistical finding via interviews with 10 charities located in Washington State. Supporting the statistical results, we find that charities believe that donors tend not to systematically embed ratings in their donation decisions. Instead, they believe that donors assess nonprofits’ effectiveness and trustworthiness via other means such as familiarity, word-of-mouth, or the visibility of the nonprofit in their community. In sum, the policy challenge is to provide information which users desire such as organizational effectiveness as opposed to basic fund allocation in the case of non-profits. What matters for policy efficacy is not how much information is provided but of what type.

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... Third, most scholars investigate external certification and accreditation including the awarding of seals of approval only. External certification and accreditation is considered a strong form of voluntary accountability because an external industry association, other nonassociation member, or independent third-party organization ("watchdog"), rather than an internal authority, reviews a nonprofit organization's compliance with certain quality and transparency standards (Cnaan, Jones, Dickin, & Salomon, 2011;Gugerty, 2009;Slatten et al., 2011;Szper & Prakash, 2011;Willems, Waldner, Dere, Matsuo, & Högy, 2017). Considering the different voluntary accountability initiatives and activities in the nonprofit sector, investigations of weaker forms of nonprofit accountability have yet been neglected. ...
... Stronger forms are external in nature and comprise of reviews by industry associations, peers, or nonassociation members. The strongest voluntary accountability form is considered an independent third-party review and a corresponding certification and accreditation process, including the awarding of a "seal of approval" (Cnaan et al., 2011;Gugerty, 2009;Szper & Prakash, 2011;Willems et al., 2017). The strength of this accountability form stems from the fact that an independent, external organization reviews the quality of the nonprofits' processes and programs (Slatten et al., 2011). ...
... In a recent study on the benefits of certification for nonprofit organizations, Feng et al. (2016) further show that the Standards of Excellence® Certification (USA) is associated with increased public support and a favorable public response to the certification process. Szper and Prakash (2011) in a study on charity watchdog ratings, however, find that changes in charity ratings tend not to affect donor support to these nonprofit organizations. Cnaan et al. (2011) show that third-party organizations have potential to particularly influence engaged and large donors. ...
Article
Voluntary accountability carried out by nonprofit organizations seeks to ensure organizational adherence to financial and ethical standards beyond legal regulations, thereby sending signals of quality and trustworthiness. Yet, insights into whether and how different forms of voluntary nonprofit accountability influence the public’s attitude are limited, and recent calls emphasize the need for further empirical investigation. Building on the combination of three different research streams, this article presents a conceptual framework that distinguishes between four forms of (voluntary) nonprofit accountability within the theoretical context of the principal-agent theory. In an online experiment with 407 participants, the author demonstrates that externally certified voluntary accountability demonstrates higher reputation and perceived quality among nonprofit organizations, but not relating to donation behavior (relative to the other accountability conditions). Internal voluntary accountability has no effect, whereas no accountability is associated with less public trust, reputation, perceived quality, and donation behavior (compared with legal minimum accountability).
... In addition to voluntary accountability programs, watchdog organizations (like the US Charity Navigator) rate fundraising organizations on financial health and their accountability efforts. Watchdogs make information about charities available in a convenient way and are thus supposed to provide clear signals to donors in order to help them make educated donation decisions (Cnaan et al., 2011;Szper & Prakash, 2011;Tremblay-Boire & Prakash, 2017). Watchdog ratings are typically involuntary, while self-regulatory programs rely on voluntary participation. ...
... Watchdog ratings are typically involuntary, while self-regulatory programs rely on voluntary participation. Generally, accountability clubs can be interpreted as quality assurance programs for NPOs as they help their principals with obtaining information on the NPOs' performance (Ortmann & Svítková, 2010;Szper & Prakash, 2011). This paper investigates the impact of charity labels on donation decisions. ...
... Charity labels can help make well-informed decisions. Individuals may specifically look for their brand value and might be more inclined to donate to charities that joined such accountability clubs (Bekkers, 2010;Sloan, 2009;Szper & Prakash, 2011;Tremblay-Boire & Prakash, 2017). ...
Article
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Several accountability clubs and watchdogs issue charity labels for stimulating charitable giving, but research on the impact of such seals of approval built on certification systems is still narrow and contradictory. Based on signaling theory and theory of perceived risk, we develop a framework matching means of signaling trustworthiness by charities and of risk reducing by donors. Additionally, we present results of a study exploring the influence of the Austrian charity label “OSGS” on the donation behavior of 192 survey participants and investigate whether donors are more willing to support charities participating in this self-regulatory program. Our study provides insights into the benefits and constraints of voluntary accountability initiatives and enhances understanding of individuals’ motivations for giving. Findings indicate that expectations toward the OSGS are high and partly exaggerated. Nevertheless, we found that generally the OSGS is not crucial for charity choice but mainly beneficial for nonprofits not widely known.
... Model Cities (and other) programs faced substantial challenges in achieving genuine citizen participation (Burke, 1971;Strange, 1972;White, 1983), and a review of public participation and volunteerism literature suggest similar challenges to grantmaking efforts persist today. It is unclear whether participatory approaches can necessarily overcome biases in funding priorities (Enright & Bourns, 2010;Franklin & Carberry-George, 1999;Gibson, 2019;Kasper et al., 2004), preferences in grantee selection (Ashley & Faulk, 2010;Galaskiewicz, 1997;Szper & Prakash, 2011;Jia Wang & Coffey, 1992), and inherent power structures in funding relationships (Eikenberry, 2007(Eikenberry, , 2016INCITE!, 2017), or if these and other issues could be exacerbated under this process. However, the specific items examined herecommittee recruitment, motivation for serving, and role negotiation with other organizational actorsrepresent three foundational issues to understanding CGC 46 operation, a first step in examining their potential to realize Arnstein's transfer of power and achieve funders' hopes for enhanced grantmaking efficacy. ...
... Capacity proxies are used because there is an underlying assumption that nonprofits would not be in "good standing" (as evidenced by their size and longevity) if their clients received poor-quality services. In this context, large organizations are associated with legitimacy (Baum & Singh, 1994;Szper & Prakash, 2011), stability (Trussel & Parsons, 2007), and future dependability (Garrow, 2011). 14 Furthermore, size is interpreted as an indicator that organizations have capacity to meet and increase their service scope (Garrow, 2011;Rosenthal, 1996;Smith & Lipsky, 1993). ...
... 14 Furthermore, size is interpreted as an indicator that organizations have capacity to meet and increase their service scope (Garrow, 2011;Rosenthal, 1996;Smith & Lipsky, 1993). Similarly, most studies suggest that older organizations garner more funder support than their younger counterparts (Johnson, 77 2016;Okten & Weisbrod, 2000;Szper & Prakash, 2011;Weisbrod & Dominguez, 1986), although these findings are less consistent than those on size. 15 ...
Article
Over the past 50 years, there has been increasing pressure to return human service funding responsibilities to state and local communities. Simultaneously, both philanthropic and government funders have sought to adopt more participatory, community-focused approaches to human service decision-making. However, little is known about (1) the extent to which locally based human service funders engage community in funding decisions; (2) how these community grantmaking committees (CGCs) are conceptualized and operate; and (3) whether they can deliver on the promise of a “front-row take” on community problems and the organizations best suited to address them. This three-paper mixed-methods dissertation aims to address these gaps in both academic and practitioner literature. Using both funder website research (n=2,029) and a survey (n=462), Paper 1 investigates the nationwide use of CGCs, finding that such committee use is prevalent nationwide, although committee members are largely white, professional, older, and lacking human service expertise. Paper 2 uses qualitative methods to examine the experiences of community grantmakers (n=20) and grantmaking staff (n=5) among six Washington State human service funders. Findings suggest challenges with achieving the goals of more participatory grantmaking, stemming mainly from committee member motivations to serve as grantmakers and sensitivity to staff involvement. Finally, Paper 3 analyzes the grant applications (n=291) and funding awards of a single municipal-level funder using a CGC. Contrary to hypotheses grounded in the purported merits of more participatory grantmaking systems, community needs and program capacity were inconsistent predictors of grant receipt. Taken together, these papers provide insight into the use, composition, practices, and funding outcomes of CGCs. Beyond just contributing to the limited scholarly literature on participatory grantmaking within human services, this dissertation also has practical implications for funders currently using or exploring use more community-based granting processes. These include recommendations for making funding approaches more transparent and accessible to community members, considerations for organizational policies that influence CGC member engagement, and adjustments to the funding deliberations process.
... Harris and Neely [39] found evidence that donors incorporate third-party rating information (based on financial measures) into their donation decision process, and nonprofits with consistently good ratings receive higher donations. Nevertheless, other researchers such as [40] considered other aspects to be of greater utility to donors, such as familiarity, word of mouth or the visibility of the nonprofit in the community. Yan and Sloan [41] focused on the interaction between employee compensation and financial performance on donations and found that high compensations have a detrimental effect on donations except when financial performance is strong. ...
... Since the evidence is not conclusive, we based our work on the contributions of [4,46,47] and therefore we do not expect individual donors to incorporate detailed non-financial information in their decisions to donate money. Rather, they act on the basis of more personal and emotional factors, in line with those noted by [37] awareness of need, solicitation, costs and benefits, altruism, reputation, psychological benefits, values and efficacy [40], familiarity, word of mouth or the visibility of the nonprofit in the community. In accordance with the foregoing, we propose the following hypotheses: Hypothesis 1 (H1). ...
... In addition, our results show that only information about results and goals reached in the projects is taken into account by private donors to make decisions about offering financial support to NGOs. These results are consistent with [40] who revealed that charities believed that "donors place more importance on programme content and outcomes than on the reputation of the organisation in the community" when making decisions about whom to donate to. The positive sign of the relation detected allows us to conclude that more information results in a greater volume of donations. ...
Article
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The notion of accountability in nonprofits suggests that these organisations should disclose financial and non-financial practices following a holistic model. In practice, the interest of both managers and researchers has focused primarily on donors and financial disclosures, for funding and methodological reasons respectively. From the perspective of impact investment, all of them, government, beneficiaries, private donors, managers and volunteers are expected to make their decisions based on non-financial information as investors expecting social returns. However, to what extent does project information that demonstrates that the non-profit organisation has achieved its social mission actually matter? The main objective of this paper is to analyse whether the donations received by non-governmental organisations NGOs are related to the information disclosed on the projects undertaken. We perform our analysis separately for individual, private and public donors. Our results show that public donors are more interested in financial disclosures, private donors find information about outcomes and impacts to be most useful and individual donors do not tend to use non-financial information when it comes to making decisions about whether to donate or not.
... However, those who give more may also expect more information and more transparency from the charities they support (Bourassa & Stang, 2016), and the returns for feeding this expectation may not be high enough to justify the costs as, in some cases, increased charitable accountability may not correlate with increased donations (Berman & Davidson, 2003), including cases of increased externally imposed accountability driven by third-party rating systems (Szper & Prakash, 2011). So, recognizing the costs, charities should avoid pursuing transparency for its own sake and use it with intention and purpose as a tool for pursuing other objectives (Tyler, 2013). ...
... While it is clear that the public wants to know more about what charities do for their communities, it is unclear how or if their behaviour will change if they do know more (Szper & Prakash, 2011). Based on the literature, it can be reasonably argued that a likely result, and reasonable objective, of addressing the program/impact information gap should be increased public knowledge leading to greater trust in charities, which, in turn, should contribute to increased donations and volunteerism. ...
Article
This article examines the public reporting of impact, defined as progress towards a charity’s mission and long-term objectives, by Canadian charities through their annual reports. The public reporting behaviour of those accredited under Imagine Canada’s Standards Program is compared with a matched sample of charities that have not sought accreditation. The objective is to explore whether trust-building activities like public disclosures of impact and third-party accreditation are convergent. The study finds that accreditation status correlates with impact measurement and reporting; both trends are linked to organizational size, and accreditation does not appear to be causing charities to increase their disclosures of impact, which suggests that there may be underlying factors driving both behaviours. These findings generally affirm earlier research that correlates organizational size with impact measurement, adding that the effect is weak. Cet article examine comment les associations caritatives canadiennes, dans leurs rapports annuels, rendent compte de leur impact, c’est-à-dire de leur progrès par rapport à leur mission et à leurs objectifs à long terme. Cette étude compare les comptes rendus d’associations accréditées par le Programme de normes d’Imagine Canada avec un échantillon apparié d’associations qui n’ont pas été accréditées. L’objectif est de déterminer s’il y a convergence parmi les démarches entreprises pour gagner la confiance du public telles que l’accréditation par un tiers et la divulgation d’impact. Cette étude observe que les associations accréditées sont plus enclines à mesurer et à divulguer leur impact; que ces deux pratiques sont plus communes dans les grandes associations; et que l’accréditation à elle seule n’entraîne pas forcément les associations caritatives à divulguer leur impact, ce qui suggère que des facteurs sous-jacents sont peut-être responsables pour les deux pratiques. En général, ces conclusions confirment des recherches antérieures trouvant une corrélation entre la grandeur d’un organisme et le désir de mesurer son impact, bien que ce lien semble être faible.
... However, the research focus is primarily from the business actors' perspective [5], discussing the positive impact of such initiatives on businesses' governance mechanisms [4,[8][9][10] and performance [11,12], while also voicing concerns regarding the initiative's voluntary nature [13,14]. Nonbusiness participants-NPOs in particular-are primarily mentioned as actors with a watchdog function [15,16], or as collaboration partners to strengthen businesses' implementation of the initiatives [17]. However, research evaluating the role of NPOs more critically by assessing their actual impact on these initiatives is scarce. ...
... Concerns have also been voiced regarding the lack of impact on, or "blue washing" of, corporate activities due to their voluntary nature [13,14]. NPOs, on the other hand, are primarily mentioned as actors with a watchdog function [15,16], or as collaboration partners to strengthen businesses' implementation of the 10 principles [17]. However, research assessing the role of NPOs and their impact on the UNGC more critically is scant. ...
Article
Full-text available
This study empirically assesses the impact of nonprofit organizations (NPOs) on multi-actor global governance initiatives. Multi-actor global governance initiatives have emerged to strengthen joint action among different societal actors to tackle transnational social and environmental issues. While such initiatives have received a great deal of academic attention, previous research has primarily focused on businesses’ perspectives. In light of the important role of NPOs within such initiatives, critically addressing NPOs’ role by assessing their impact on the effectiveness of such initiatives is crucial. This article builds on the United Nations Global Compact (UNGC)—the largest multi-actor global governance initiative in the world—and offers a panel analysis on a unique dataset including 820 NPOs from 68 different countries. The findings suggest that NPOs have indeed strengthened the UNGC over time, yet their engagement explains only a small fraction of differences in UNGC activity across countries. This study contributes to the emerging research on nonprofits’ social responsibility by fostering the actorhood thesis, which places higher responsibility for the impact and requirements for accountability on NPOs. Furthermore, the study supports discussions about the increasing political role of NPOs by providing the first empirical evidence for their political leadership and impact in multi-actor global governance initiatives.
... Research shows that personal appearance, professionalism, and incentives for asking can influence giving responses (Barasch, Berman, & Small, 2016;Bull & Gibson-Robinson, 1981;Landry et al., 2006; L. R. Levine, Bluni, & Hochman, 1998;List & Price, 2009;Sargeant & Hudson, 2008;West & Jan Brown, 1975). Fundraising organizations are sometimes more successful when they are perceived to be effective (Iyer, Kashyap, & Diamond, 2012;Katz, 2018;Scharf & Smith, 2016; J. R. Smith & McSweeney, 2007) and trustworthy (e.g., Beldad, Snip, & van Hoof, 2014;Naskrent & Siebelt, 2011;Sargeant & Hudson, 2008;Sleesman & Conlon, 2016;Thomas et al., 2015), although these relationships are not always found (Berman, Barasch, Levine, & Small, 2018;Katz, 2018;Silvergleid, 2003;Szper & Prakash, 2011;Tremblay-Boire & Prakash, 2017;Wiepking, 2010). ...
... A series of studies designed to test the impact of effectiveness ratings on charity preferences found that people prioritize subjective preferences over rational data on effectiveness in allocating donations (Berman et al., 2018). Further, two separate longitudinal analyses of charity watchdog ratings and funding in the United States found that changes in charity effectiveness ratings do not influence donor support (Silvergleid, 2003;Szper & Prakash, 2011). ...
Thesis
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This thesis applies social psychological theories about intergroup relations (e.g., Social Identity Theory, Tajfel, 1981; the Intergroup Helping Relations as Status Relations model, Nadler, 2002) to investigate the process and outcomes of charitable giving. Moving beyond the traditional focus on studying donors, this thesis uses a mixed-methods approach (surveys, experiments, thematic analysis, and literature review) to show that charitable giving is triadic, relational, and contextualized. That is, decisions about donations are informed by a triad of actors (donors, beneficiaries, and fundraisers), the relationships between them, and the wider social context. Chapter 1 provides a general overview of previous scholarly work on charitable giving and key psychological theories identified as relevant to my approach. Findings from Chapters 2 and 3 confirm that beneficiaries affect donor choices and that the relationships (e.g., shared identities) between particular donors and particular beneficiaries are especially important. Chapter 2 comprises two surveys of confirmed (N = 675) and self-reported (N = 376) donors, which show that donors are not universally generous. Instead, consistent with the social identity approach (Tajfel, 1981; Turner, Hogg, Oakes, Reicher & Wetherell, 1987), donors prefer to support charities that align with their social groups in meaningful ways. Chapter 3 goes on to present thematic analyses of responses to the question of why donors support their favorite charity (N = 1,849 from 117 countries). Results show a self/other dichotomy in donor motivation: donors are more likely to reference the self when explaining giving to religious and research charities, but are more likely to reference the other (i.e., beneficiary) when explaining giving to social service, animal, or international charities. In combination, Chapters 4 and 5 demonstrate that social contexts affect charitable responses, in part by changing the perceived relations between donors and beneficiaries. Chapter 4 presents one survey (N = 189) and one experiment (N = 290) that show how government policy on foreign aid affects private giving by changing perceptions of national giving norms. Chapter 5 presents two experiments (combined N = 440) that demonstrate how political advocacy can affect charitable giving by changing donor emotions, perceptions of efficacy, and identification with beneficiaries. Chapter 6 highlights the importance of also considering fundraisers when studying charitable giving. Mediation analyses from two samples of peer-to-peer fundraisers (combined N = 1,647) show that when fundraisers identify more with their nominated charity they take more actions to raise money and that, in turn, results in more funds raised. In particular, results show that actions which make the fundraiser more salient (e.g., adding photos, sharing personal motivations) are most effective. Chapter 7 draws together evidence from my program of research and more than 300 articles from the interdisciplinary literature to generate a new model of charitable giving: the charitable triad. This model theorizes that charitable giving is informed by the dyadic and triadic relationships between donors, beneficiaries, and fundraisers as well as salient aspects of the wider social context. Finally, Chapter 8 draws the entire body of work together, discusses it in relation to previous research, and presents future directions for study. The program of research presented in this thesis demonstrates the triadic nature of giving, setting a new agenda for both future research on charitable giving and fundraising practice.
... Moreover, previous studies suggest that certifications are not a relevant criteria for attesting to the public recognition of NPOs and have no effect on stakeholder support intentions (Szper & Prakash, 2011;Willems, Waldner, Dere, Matsuo, & Högy, 2017). ...
... We conducted an extensive review of prior operationalizations (see. (Baur & Palazzo, 2011) and have no effect on stakeholder support intentions (Szper & Prakash, 2011;Willems et al., 2017). ...
... They are based on the belief that a market competition exists or can be created between NGOs. In this market, private donors are consumers of NGOs whom are assumedand this assumption might be incorrect according to empirical research (Szper & Prakash ;-to reward NGOs with good ratings by financing them and to sanction NGOs with negative ratings by stopping their financial support to the NGO. Accountability in these instruments is understood as a relationship of evaluation, mediated by the evaluations of rating agencies and watchdogs who evaluate the NGO against their own quality standards, and indirectly enforced by the potential exit of potential donors who are consumers. ...
Chapter
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After the social and political transformation, followed by a process of deindustrialisation and a very high mobility of young people, the working shortage and demographic change is having an impact on the development of communities in East Germany. Young person leaving their home regions for educational reasons or job opportunities. Like all brain drain regions, East Germany is loosing their high potentials to the big cities. Almost paradoxally in certain branches of industry and especially in services in this regions is a lack of qualified employees. Young people are seen as the future for regional development not only as the parents of the next generation but formost as innovative agents of changes. The following article is focused on the question which kind of impact open adult education could have on innovative rural development to improve the attractiveness of such areas. This contribution presents the challenges of rural adult education, describes the demographic change in East Germany and provides research results from the perspective of the “missing” people in order to regard practical approaches for local development. In a wider perspective regional development emphasises more than the possibility to work. Keywords: adult education, rural development, demographic change, East Germany
... It is vital that NPOs explore various ways of adhering to requirements regarding transparency and accountability in this area of governance, particularly against the backdrop of the worldwide economic recession and increased competition to recruit and retain donors. Transparency and accountability work together to strengthen the consistency of management actions, thereby building credibility and trust (Szper & Prakash, 2011). The combined process of performance rating and shelter development, expedited by a neutral, objective and external entity, should improve the transparency and accountability of shelter performance nationally, while providing concrete feedback and resources for growth and development. ...
... Such faltering is demonstrated by the mixed evidence on the extent to which watchdog ratings are used in donor decision making (Mitchell 2014). While a positive relationship between a change in ratings and contributions is found by Gordon, Knock, and Neely (2009) and a slight effect of positive ratings on donations, but with no effect of bad ratings by Sloan (2009), no effects of either good or poor ratings on donor behavior or on how nonprofits report information are indicated by Szper and Prakash (2011). Further, Cnaan et al. (2011) show that most donors do not bother to consult the ratings at all when making their decisions. ...
Article
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Investigations of how Oxfam Great Britain (GB) managed its safeguarding systems and handled revelations of sexual exploitation by its staff highlighted a variety of internal governance and culture issues, and a lack of transparency as it sought to protect its reputation. The current models of reputation management do not fully explain its actions, however. This article argues that five systemic factors in the environment in which nonprofits operate create undue pressures for protection of reputations and contribute to poor assessment of risks, inadequate accountability systems and limited transparency. These factors include: a stress on success and related competition for market share and pressures for growth; expectations of low overheads; challenges of governance and risk management; lack of public awareness; and regulatory gaps. Drawing on media coverage and the commissions of inquiry, the analysis shows how all of these contextual factors were at play in the Oxfam case, and suggests potential reforms.
... Trust is one of the most influential criteria donors-both government-based and private-use when deciding which nonprofits to support (Rose-Ackerman 1996;Bekkers 2003;Alhidari et al. 2018). High rankings by independent auditors like Charity Navigator may bolster organizations' credibility (Sloan 2009), but the reputation nonprofits have built over time is ultimately a more important factor in donors' decisions to give (Szper and Prakash 2011). Negative media coverage, even when based on unverified accusations, can bruise nonprofits' reputations and deprive them of much-needed funding (Cottle and Nolan 2007). ...
Article
We examine Twitter data to assess the impact of media exposes on the reputations of two international nonprofits, Oxfam and Save the Children (STC). Using a random sample of 6794 Tweets, we study the daily gap between positive and negative sentiments expressed towards these organizations. The “unweighted gap” and the “weighted gap” (weighted by the number of followers) of the Twitter handle follow broadly the same trajectory with high fluctuation in response to new negative or positive media stories. Twitter handles with large audiences amplify variability in weighted gap. While Oxfam’s reputation did not fully recover to pre-Haiti levels even 6 months after the scandal, STC’s reputation returned to pre-scandal levels in 8 days, although it fluctuated in response to new revelations. Overall, reputation recovery for both organizations was aided when they received celebrity endorsements and focused public attention on their positive activities, especially by linking to visible global events.
... Accountability was practiced using governance mechanisms such as monitoring and evaluation, which had been developed in the private sector, and have become prevalent in the public sector under the "new public management" approach. In the first wave of NGO accountability, governance reforms focused primarily on professional management, and transparency with respect to funding and expenditure, and upwardfocused (Slim 2002) relationships that were prioritized with donors (Sloan 2009;Szper and Prakash 2011;AbouAssi 2012) and political/legal authorities (Cordery and Baskerville 2010;Phillips 2012). ...
Thesis
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This quasi-cumulative dissertation analyzes the institutional and ideational challenges of organizations in public discourses. Academic scholars with different theoretical backgrounds assign NGOs a leading role to promote and fertilize public discourses in democratic societies. However, empirical research documents numerous cases, in which NGOs fostered discourse failure by launching controversial campaigns, the use of distorting framing strategies or even misinforming the general public. Following the ordonomic approach, this dissertation provides new counter-intuitive explanations for discourse failure and outlines feasible ideational and institutional reform proposals. The first article identifies the problem of discourse failure in the case of the public controversy (2015-2017) in Germany about two international trade agreements. The second article investigates existing solution approaches to discourse failure. In particular, it presents a longitudinal case study (2006-2018) about Accountable Now, which is the leading global initiative of international NGOs to promote the effectiveness and collective reputation of the NGO sector. The third article theorizes that discourse failure is the result of two different types of social dilemmas that require specific reforms. The following discussion links the empirical findings and theoretical contributions of the three previous articles to an ordonomic analysis of discourse failure in the NGO sector. This dissertation yields valuable theoretical implications for deliberative and rational-choice theory, the research on NGO accountability, and NGO self-regulation in practice.
... Theoretically (Zhuang et al., 2014) and empirically , a positive interaction between the level of available information and the propensity to give, a signal of donors' trust, has been shown. Disclosure helps to reduce conflicts of interests, mismanagement of the resources and in the end, agency costs (Krishnan, Yetman, & Yetman, 2006;Szper & Prakash, 2011). Besides, the disclosure mechanism brings differentiation among NPOs (Milgrom, 1981): meanwhile for organizations with negative information, the less is revealed, the better, organizations with advantageous information will be tempted to spread larger amount of information. ...
Conference Paper
This study develops a reflective online disclosure scale, following the recommended methodological steps and precautions of a scale development process. This new scale brings clarity among existing measurement tools of web NPOs' transparency and disclosure. The scale results from an exploratory factor analysis applied on a database collected from the websites of 216 organizations collaborating with Donorinfo, a foundation working for the transparency of the Belgian philanthropic sector. Normative judgements from field experts support this exploratory phase. The scale is purified thanks to a confirmatory factor analysis applied on a database related to a random sample of Belgian NPOs, comparable to the Donorinfo sample. Consultation of real donors' opinion validate the proposed scale. As a result, the paper provides a reliable and valid online disclosure scale, a measurement tool to approach private donors' perception of transparency.
... Pressure from performance-based funding from government and foundations, the growth of social media, and the 24-hour news cycle have increasingly shifted nonprofit organizations' attention to reputation management, crisis resistance, and recovery (Szper & Prakash, 2011;Tremblay-Boire & Prakash, 2015;Willems, 2016). The smallest error or even an unverified negative rumor can quickly spread and damage the reputation of an organization, which in turn can substantially reduce support from various stakeholders (Forbes, 1998;Radbournes, 2003;Sarstedt & Schloderer, 2010). ...
Article
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Open Access: https://journal-bpa.org/index.php/jbpa/article/view/45 The reputations of nonprofit organizations can be damaged as a result of an organizational scandal, as demonstrated by recent examples of international nonprofit and non-governmental organizations. Common practice and findings from studies using administrative data suggest that nonprofits can reduce the negative effects of scandals by voluntarily disclosing information about the event to stakeholders. This study tests those assumptions in an experimental framework and finds that organizations’ voluntary disclosure of a scandal does not effectively mitigate negative donation intentions following the crisis.
... States found that changes in charity effectiveness ratings do not influence donor support (Szper and Prakash 2011). It is therefore likely that charity impact is only a consideration for some donors or under certain conditions. 5. Religious affiliation (yes or no). ...
Preprint
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Fundraising involves the simultaneous consideration of three actors-the donor, the charitable organization raising the funds, and the beneficiary. Successful fundraising appeals match donor motivations to preferred organizational and beneficiary attributes while acknowledging the influence of alternative, competitive appeals. In this paper, we propose an integrated method of analysis that combines multiple conjoint analyses for understanding preferences for charities and beneficiaries, with donor text and scaled responses describing their motivations. Analyses revealed five donor archetypes (i.e., exemplars): 'Cancer Carers' (24%), 'Effective Altruists' (19%), 'Animal and Nature Lovers' (16%), 'Emergency Responders' (23%), and 'Feel-good Do-gooders' (18%). These archetypes cannot be understood with exclusive reference to donor characteristics and motivations; rather archetypes combine donor characteristics with features of preferred beneficiaries and fundraisers. We show how our model can be used to conduct integrated, conditional and competitive analyses useful for fundraising design.
... Theoretically (Zhuang et al., 2014) and empirically , a positive interaction between the level of available information and the propensity to give, a signal of donors' trust, has been shown. Transparency helps to reduce conflicts of interests, mismanagement of the resources and in the end, agency costs (Krishnan, Yetman, & Yetman, 2006;Szper & Prakash, 2011). Besides, the disclosure mechanism brings differentiation among NPOs thanks to the Milgrom's (1981) principle of total disclosure. ...
Conference Paper
By proposing a new e-transparency index, this paper aims to improve the understanding and the measurement of the concept of transparency of the NPOs. The index is built carefully, following the recommended methodological steps and precautions during the construction process of a composite indicator. In particular, three different weighting methods are compared, deep sensitive analyses are carried and the validity of the index is confirmed. The index results from applications of statistical methods combined with normative judgements from field experts. The proposed index is calculated for the 250 organizations collaborating with Donorinfo, a foundation working for the transparency of the Belgian philanthropic sector. The index values obtained from collected data are confronted to real donors' perception of the transparency of the same tested websites. As a result, the paper provides a methodologically valid e-transparency index, a measurement tool of transparency ready to use and well conceptualized.
... For this reason, the General Assembly has a role to play to support internal democracy, and is the body that can approve the CSO budget (Kreuzer, 2009) i . Funders and economic stakeholders also play a major role in fostering the accountability of CSOs ( Szper & Prakash, 2011;Thompson, 2010;Young, 2011). ...
... De esta forma, la transparencia es concebida como un reconocimiento de que los sistemas no son perfectos y que necesitan controles y balances para que los posibles errores y equivocaciones puedan ser identificados y rectificados (Burger & Owens, 2010). Así, la transparencia aminora los conflictos de intereses y la mala gestión de los recursos (Szper & Prakash, 2011), ya que constituye un potente mecanismo de señalización. ...
... This search behavior of stakeholders helps explain why charities have voluntarily adapted transparency standards set by external governance agencies such as accountability certifications (Becker, 2018) and best practices as recommended by charity watchdogs (Szper and Prakash, 2011). While these external governance agencies are not promulgators of the law, they can have a powerful effect on the perceptions of the charities, and their governance practices. ...
... Evidence for high efficiency rates positively affecting donation is limited (Szper & Prakash, 2011). Modest correlations have been observed between efficiency and donations given to, and volunteering for, particular organizations (Bowman, 2006;Callen, 1994). ...
Article
Full-text available
Performance measurement is considered useful in guiding donations to charities. We investigated whether efficiency rates predominately guide donations relative to available alternatives, or influence donation amounts. Across four studies (N = 460), participants evaluating charity advertisements saw randomly assigned efficiency rates presented as background information. Participants could pledge a portion of a gift card, offered in return for participation, to their pick of presented charities. Participants were sensitive to relative, but not absolute, efficiency, giving more often to more relatively efficient charities but generally did not pledge them more money. Even providing an explicit standard of efficiency did not create an absolute sensitivity to efficiency, suggesting that efficiency information, steers, rather than encourages, or discourages, donations overall.
... Accountability also concerns about the transparency of management judgments (Baapogmah et al., 2015). Transparency and accountability cooperate to increase the consistency of management performance (Crofts and Bisman, 2010;Szper and Prakash, 2011). ...
... La transparencia informativa permite mitigar las asimetrías de información entre un principal y un agente ( Gonedes, 1978;Leftwich et al, 1981), reduce el poder de los agentes al hacer que más información esté disponible para los principales, de modo que puedan asegurar procesos de entrega de resultados más cercanos a sus preferencias ( Christensen et al, 2010) y aminora los confl ictos de intereses y la mala gestión de los recursos (Szper y Prakash, 2011), ya que constituye un potente mecanismo de señalización. ...
Article
Full-text available
Nonprofit organizations are required to be transparent in order to build trust, enhance their legitimacy and create the conditions to promote their sustainability. To demonstrate transparency, external control mechanisms, such as quality or good governance practices certification, have been developed by private organizations such as CONGDE or Fundación Lealtad. However, nonprofit organizations could employ internal control mechanisms for the same purpose, such as the disclosure of relevant information for their stakeholders via their web pages. Web sites allow the improvement of organizations accountability because organizations can disclosure the information required by their stakeholders at a low cost and in real time. The aim of this paper is to assess whether the organizations certified as transparent and good governance by the CONGDE and Fundación Lealtad, disclose this information through their web pages. We have analyzed the websites of 114 Spanish NGDOs that have been accredited by the CONGDE and/or Fundación Lealtad to that end. The results show that the level of information disclosed through the website is still quite limited, focusing on information that does not require updating and information regarding accounting statements. In addition, there are no significant differences between NGDOs on the basis of the external institution issuing the transparency seal.
... Accountability also has seen to have different effects, however, with the argument that it may be good in reinforcing some forms of trust, but limits and damages deeper forms of relational trust (Keating & Thrandardottir, 2017). It is interesting as the links between the accountability agenda, transparency, and trust in non-governmental organisations have been referred to strongly by practitioners and academics (Burger and Seabe, 2014;Farrell and Knight, 2003;Grant and Keohane, 2005;Havrda and Kutílek, 2010;Phillips, 2012;Prakash and Gugerty, 2010;Prideaux, 2015;Sir Stuart Etherington et al., 2015;Steffek and Hahn, 2010;Szper and Prakash, 2011;Weisband and Ebrahim, 2007;Lee, 2004;Marschall, 2010;Sloan, 2009;Lloyd, 2005;Goddard and Assad, 2005). Hugo Slim (2002) argues that NGOs need to act positively on potential trust problems through accountability. ...
Technical Report
Trust is extremely important for the ICRC. It can assist in the facilitation of access and enables the ICRC to act more effectively by creating strong relationships with its employees, movement partners, national agencies, donors, and those effected by crisis. Understood as an interplay between positive expectations allowing for the acceptance of vulnerability in a context in which there is risk and interdependence, the literature shows there are many ways of thinking about the ways in which trust works.
... Certifications also are not a discriminatory variable; most international NGOs are certified. Moreover, previous studies suggest that certifications are not relevant criteria for attesting to the public recognition of NGOs (Baur & Palazzo, 2011) and have no effect on stakeholder support intentions (Szper & Prakash, 2011;Willems et al., 2017). ...
Article
Full-text available
Despite intensive research dedicated to both social alliances and business models, a research gap persists with regard to why and how nonprofit organizations (NPOs) choose (or not) to partner with for-profit organizations (FPOs) to obtain funding. By adopting an NPO-centered analysis, this article presents a new framework, based on Bourdieu’s forms of capital. With an explicit consideration of symbolic capital—and the risks of damaging it if the NPO turns to FPOs for funding—the authors explore specific issues related to NPO business models. The empirical test of the framework relies on an original database of 150 nongovernmental organizations with international scope. It reveals four distinct business models (public, civic, opportunistic, and diversified) and demonstrates that a high stock of symbolic capital gives organizations the power to choose and eventually diversify their funding sources, including partnering with select FPOs.
... This search behavior of stakeholders helps explain why charities have voluntarily adapted transparency standards set by external governance agencies such as accountability certifications (Becker, 2018) and best practices as recommended by charity watchdogs (Szper and Prakash, 2011). While these external governance agencies are not promulgators of the law, they can have a powerful effect on the perceptions of the charities, and their governance practices. ...
Article
Corporate governance has received substantial scholarly attention for decades, although the focus of this research has by and large been on publicly traded for-profit organizations. However, agency problems are increasingly recognized in nonprofits. As such, we examine the application of corporate governance logic in the context of nonprofits. Our study relies on nearly a decade of data spanning 6853 US-based charities and comprising nearly US$346 billion in total revenue. Our results show that common corporate governance practices—such as independent boards, chief executive officer oversight, and transparency—enhance the degree to which donor contributions are allocated toward a charity’s mission. Overall, we assess the broader applicability and benefits of corporate governance and build on literature highlighting links between for-profit and nonprofit organizations. In doing so, we demonstrate the usefulness of governance in this economically and socially consequential context.
... If the Easterbrook and Fischel (1984) approach to securities disclosures applied in the charitable context, fundseekers would voluntarily reveal fundraising ratios, and disclosures mandated by the government or revealed by third parties would not provide additional information to donors. Recent research is inconsistent on whether donors respond more to fundraising expenses when they are made readily available through ratings offered by third-party evaluators (Gordon et al., 2009;Szper & Prakash, 2011). ...
... For example, Appe (2016) documented how network partners set up collective communication channels in Latin America to increase shared legitimacy and accountability. Moreover, a substantial body of literature has focused on the role of regulatory bodies and regimens, transorganizational codes of conduct and watchdog organizations established to induce transparency and accountability in organizational networks (Dawson and Dunn, 2006;Phillips, 2013;Szper and Prakash, 2011;Tremblay-Boire et al., 2016). ...
Chapter
Despite the vast repertoire of practitioner and scientific literature since the early 1990s on how civil society organizations (CSOs) should be governed, we continue to regularly hear stories of severe organizational crises. Even well-respected, internationally active CSOs sometimes find themselves in the middle of a media storm (Archambeault and Webber, 2018; Cordery and Baskerville, 2011; Harris et al., 2018; Willems, 2016; Willems and Faulk 2019). It is naïve to assume that such events will cease in the future or at least stop endangering the sustainability and continuity of CSOs. Nevertheless, an explicit evaluation of how crisis situations can be avoided and how their devastatingly negative effects can be mitigated through CSO governance processes makes it necessary to focus on CSO accountability and transparency. As a result, the clarification and elaboration of the concepts of accountability and transparency can strengthen theoretical and practical insights as to how CSOs can become more crisis-resistant and resilient (Brown, 2005; Helmig et al., 2014). In addition, insight into the inherent trade-offs that CSO leadership teams need to consider in their governance decisions can help both practitioners and researchers to (1) avoid more CSO crisis situations in the future, (2) more effectively overcome such crises when they occur and (3) identify the contextual and organizational factors affecting leaders' governance decisions. Against this background, the aim of this chapter is threefold: 1. Provide an elaborated definition of CSO transparency and accountability that takes into account the nature and role of CSOs in contemporary societies. After highlighting the uniquely defining characteristics of CSOs, the chapter identifies from the inter-disciplinary literature a set of circumstances that underpin the need for a multidimensional elaboration of transparency and accountability specific to CSOs. 2. Document governance responsibilities that CSOs have with respect to transparency and accountability. The chapter explains why transparency and accountability are necessary elements of the CSO governance function. 3. Develop propositions for further scientific elaboration and validation of how CSO governance practices encompass but also support and lead to CSO transparency and accountability. The output of the first two research aims is juxtaposed with five dimensions of a governance quality index, highlighting how governance quality dimensions include and relate to various aspects of CSO transparency and accountability.
... Individual donors do not use the same performance-based metrics as official donors (Desai and Kharas, 2018). Rather, individual donors often use heuristics to simplify their decision-making, making cursory judgments about an organization's issue area, mission, vision, and values and seek out Supplementary Information from friends, family, and acquaintances (Chaudhry and Heiss, 2021;Szper and Prakash, 2011;Tremblay-Boire and Prakash, 2017). Due to these differences, individual donors can help address some of the challenges arising from reduced public funding available to INGOs. ...
Article
The phenomenon of closing civic space has adversely impacted international non‐governmental organization (INGO) funding. We argue that individual private donors can be important in sustaining the operations of INGOs working in repressive contexts. Individual donors do not use the same performance‐based metrics as official aid donors. Rather, trust can be an important component of individual donor support for nonprofits working towards difficult goals. How does trust in charitable organizations influence individuals' preferences to donate, especially when these groups face crackdown? Using a simulated market for philanthropic donations based on data from a nationally representative sample of individuals in the United States who regularly donate to charity, we find that trust in INGOs matters substantially in shaping donor preferences. Donor profiles with high levels of social trust are likely to donate to INGOs with friendly relationships with host governments. This support holds steady if INGOs face criticism or crackdown. In contrast, donor profiles with lower levels of social trust prefer to donate to organizations that do not face criticism or crackdown abroad. The global crackdown on NGOs may thus possibly sour NGOs' least trusting individual donors. Our findings have practical implications for INGOs raising funds from individuals amid closing civic space. Research on international giving by individuals, especially in the era of closing civic space, is not meant to find answers that can act as substitutes for strategic policy responses, especially by official aid donors and foundations. However, many INGOs are under immediate threat, and individual‐level philanthropy can help support these organizations.
... Levine and Zahradnik (2012) show the positive correlation between MO and the financial viability of NPOs. Donors prefer not to donate to those organizations with higher administrative costs (Li et al., 2012;Szper & Prakash, 2011). They are willing to part more significant donations if they know the program's details (s) where these funds would be utilized (Pope et al., 2015). ...
Article
Not-for-profit organizations (NPOs) depend heavily on external resources to sustain their operations and program delivery. Their financial sustainability depends on their ability to attract donors’ resources, which is a challenging task in the resource-scarce external environment. Our study investigates the impact of two strategic orientations – market orientation and internal market orientation – on the success of NPOs at attracting resources. Based on survey data gathered from 360 NPOs having field operations in India in the space of environment, livelihoods, and natural resource management, and using the Partial Least Square based Structural Equation Modeling (PLS-SEM) method, we find that market orientation and staff retention predict resource attraction by NPOs. Internal market orientation has an indirect impact on resource attraction through staff retention. The study also finds that bigger NPOs attract more resources than smaller ones.
... If the Easterbrook and Fischel (1984) approach to securities disclosures applied in the charitable context, fundseekers would voluntarily reveal fundraising ratios, and disclosures mandated by the government or revealed by third parties would not provide additional information to donors. Recent research is inconsistent on whether donors respond more to fundraising expenses when they are made readily available through ratings offered by third-party evaluators (Gordon et al., 2009;Szper & Prakash, 2011). ...
Article
Do donors seek out potentially adverse information about organizations making fundraising appeals? Do they react when it is readily available? Do they draw negative inferences when critical information is not available? To answer these questions, we consider previously unexamined large-scale natural experiments involving U.S. charitable organizations—tax-exempt organizations that file Internal Revenue Service (IRS) Form 990. Using standard difference-in-differences designs, we find that donors penalize organizations with high fundraising costs when there is mandatory disclosure or involuntary disclosure by a third-party reporter. Organizations with lower fundraising costs fundraise more successfully in the presence of these disclosures. The contrast with donors’ behavior when such information is not available suggests that donors do not draw correct inferences when potentially consequential information is not disclosed. Disclose-on-request requirements, in contrast, apparently do not have any significant impact on donors’ or organizations’ behavior. We then sketch implications for the regulation of donations to charities and their modern cousins, such as crowdfunding and social enterprise organizations.
... Model Cities (and other) programs faced substantial challenges in achieving genuine citizen participation (Burke, 1971;Strange, 1972;White, 1983), and a review of public participation and volunteerism literature suggest similar challenges to grantmaking efforts persist today. It is unclear whether participatory approaches can necessarily overcome biases in funding priorities (Enright & Bourns, 2010;Franklin & Carberry-George, 1999;Gibson, 2019;Kasper et al., 2004), preferences in grantee selection (Ashley & Faulk, 2010;Galaskiewicz, 1997;Szper & Prakash, 2011;Wang & Coffey, 1992), and inherent power structures in funding relationships (Eikenberry, 2007(Eikenberry, , 2016INCITE!, 2017), or if these and other issues could be exacerbated under this process. However, the specific items examined here committee recruitment, motivation for serving, and role negotiation with other organizational actorsrepresent three foundational issues to understanding CGC operation, a first step in examining their potential to realize Arnstein's transfer of power and achieve funders' hopes for enhanced grantmaking efficacy. ...
We explore how funding decisions are made when giving grants to human services organizations that include mental and physical health. Community engagement in the decision-making processes is expected to yield many benefits, including a deeper understanding of community problems, a better sense of grantee needs and challenges, and greater effectiveness. This qualitative study examines the experiences of 20 community grantmakers and 5 grantmaking staff in six Washington State human service funders. Findings suggest challenges with achieving the goals of more participatory grantmaking, stemming mainly from recruitment processes, grantmaker motivations, and sensitivity to staff roles.
... Model Cities (and other) programs faced substantial challenges in achieving genuine citizen participation (Burke, 1971;Strange, 1972;White, 1983), and a review of public participation and volunteerism literature suggest similar challenges to grantmaking efforts persist today. It is unclear whether participatory approaches can necessarily overcome biases in funding priorities (Enright & Bourns, 2010;Franklin & Carberry-George, 1999;Gibson, 2019;Kasper et al., 2004), preferences in grantee selection (Ashley & Faulk, 2010;Galaskiewicz, 1997;Szper & Prakash, 2011;Wang & Coffey, 1992), and inherent power structures in funding relationships (Eikenberry, 2007(Eikenberry, , 2016INCITE!, 2017), or if these and other issues could be exacerbated under this process. However, the specific items examined here committee recruitment, motivation for serving, and role negotiation with other organizational actorsrepresent three foundational issues to understanding CGC operation, a first step in examining their potential to realize Arnstein's transfer of power and achieve funders' hopes for enhanced grantmaking efficacy. ...
We explore how funding decisions are made when giving grants to human services organizations that include mental and physical health. Community engagement in the decision-making processes is expected to yield many benefits, including a deeper understanding of community problems, a better sense of grantee needs and challenges, and greater effectiveness. This qualitative study examines the experiences of 20 community grantmakers and 5 grantmaking staff in six Washington State human service funders. Findings suggest challenges with achieving the goals of more participatory grantmaking, stemming mainly from recruitment processes, grantmaker motivations, and sensitivity to staff roles. Acknowledgments: The authors sincerely thank the funder staff and volunteers whose participation made this research possible. We are also grateful to the three anonymous reviewers for their generous and helpful feedback.
... Furthermore, two surveys found that the actions peer-topeer fundraisers took to signal the effectiveness of the charity they were raising money for explained just 1% of the variance in actual funds raised . Finally, two longitudinal studies showed that changes in charity watchdog effectiveness ratings do not affect donor support over time (Silvergleid, 2003;Szper & Prakash, 2011). Combined, these studies show that charity effectiveness is relatively unimportant for most donors' charitable decisions. ...
Article
Trust is assumed to be important for charitable giving. However, disparate associations have been found, and recent theoretical approaches emphasize motives for giving that do not rely on trust. To resolve this tension, we conducted a systematic review of evidence generated between 1988 and 2020. A meta-analysis of 69 effect sizes from 42 studies sampling 81,604 people in 31 countries confirmed a positive association between trust and giving across diverse measures, r = .22. Meta-regressions showed that organizational ( r = .35) and sectoral trust ( r = .27) were more strongly associated with giving than were generalized ( r = .11) or institutional trust ( r = .14). The relationship was also stronger in non-western (vs Western) countries and in nonrepresentative (vs nationally representative) samples. All evidence was correlational, and few studies measured actual behavior. We discuss implications for theories of trust and for fundraising practice, and highlight critical gaps in evidence.
... Accountability was practiced using governance mechanisms such as monitoring and evaluation, which had been developed in the private sector, and have become prevalent in the public sector under the 'new public management' approach. In the first wave of NGO accountability, governance reforms focused primarily on professional management, and transparency with respect to funding and expenditure, and upward-focused (Slim 2002) relationships that were prioritized with donors (Sloan 2009;Szper and Prakash 2011;AbouAssi 2012) and political/ legal authorities (Cordery and Baskerville 2010;Phillips 2012). ...
... Although charity watchdogs like Charity Navigator have emerged to gauge nonprofit operations' quality, their ratings are often not perfect as nonprofits often receive no ratings (Tremblay-Boire and Prakash 2017). Moreover, research suggests that donors often do not use charity navigator ratings to make their donation decisions (Szper and Prakash 2011). ...
Article
Media plays a major role in molding US public opinions about Muslims. This paper assesses the effect of 9/11 events on the US media's framing of the Muslim nonprofit sector. Overall it finds that the press was more likely to represent the Muslim nonprofit negatively post 9/11. However, post 9/11, the media framing of Muslim nonprofits was mixed. While the media was more likely to associate Muslim nonprofits and terrorism, they were also more likely to represent Muslim nonprofits as organizations that faced persecution because of Islamophobia, government scrutiny, or hate attacks against them. These media frames may have contributed to public perceptions that Muslim organizations support terrorism while also raising the alarm amongst various stakeholders that the government and the general public are persecuting the Muslim nonprofit sector.
... While vital to the sustainability of the sector, trust is also recognised as being volatile and highly susceptible to disruption by scandals and negative media coverage (Hind, 2017;Lalák & Harrison-Byrne, 2019;LeClair, 2019). It is one of the most influential criteria donors and funders use when deciding which charities to support (Scurlock, Dolsak, & Prakash, 2020) and good reputation, particularly when it is well established, is valuable (Szper & Prakash, 2011). Therefore, the importance of acting appropriately, having goodgovernance processes, being accountable and transparent, avoiding scandals, dealing with (even possibly unfair) media attention and, if problems do arise, managing them quickly and effectively (both from operational and communication perspectives) is crucial in safeguarding reputation and maintaining (or re-establishing damaged) trust. ...
Article
Full-text available
Trust in charities is critical in terms of the health of the sector, and also in relation to the establishment and maintenance of social cohesiveness. Moreover, lack of trust can not only damage the charity sector (having negative impacts on public perceptions and donor giving) but can also undermine attempts at building social capital. Yet, how trust is defined, the various forms that it takes and how it is established (or re‐established, if lost) is unclear. This paper explores the various conceptions of what trust is, applies them to charities and examines trust in relation to the sustainability of the sector. A key finding is that trust has many dimensions, and charities (and the sector as a whole) need to work on a range of fronts on an ongoing basis to protect and build perceptions of trustworthiness (‘many stones can form an arch’). As a consequence, the paper presents an outline research agenda (in the form of four key questions) that encourages future researchers to enhance understanding of the important interplay between trust and charities more fully. This focuses on the relationship between charities and beneficiaries, how trust‐building activities vary with charity size/area of activity, the potential role of communicating service delivery and what ‘good regulation’ might look like.
... more information available to the principals. Therefore, the delivery processes are closer to the principals' preferences (Christensen et al., 2010) and reduce the conflicts of interest and mismanagement of resources (Szper and Prakash, 2011), because they are a powerful signaling mechanism. In fact, transparency is positive not only for donors and funders but also for any stakeholder in an organization (Burger and Owens, 2010) because it facilitates the external control of the organization (Gugerty, 2009;Burger and Owens, 2010), which improves performance (Murtaza, 2012) and efficiency (Benjamin, 2010). ...
Article
Full-text available
This study examines (a) whether nongovernmental development organizations (NGDOs) disseminate relevant information for their stakeholders through their web pages, information that after being reviewed and evaluated by external organizations such as the Spanish Coordinator of Development NGO or Lealtad Foundation, allowed these NGDOs to obtain a seal of transparency and (b) whether their level of transparency influences efficiency. To determine online transparency, web pages of seal-approved NGDOs were reviewed to assess the availability of relevant information. This paper uses data envelopment analysis to assess the efficiency using an input orientation. To determine the influence of online transparency on efficiency, an ordinary least squares regression was used. Results show that while increased transparency has a significant effect on efficiency, the level of information disclosure of NGDOs through their web pages has considerable room for improvement. Improved transparency leads to best practices and increased competition in obtaining financing and support from society. To improve transparency in the nonprofit sector, external organizations have created a series of seals to certify that an organization complies with the basic principles of transparency. In addition, new technologies make it easier for organizations to disseminate information quickly and economically. This article contributes to the literature regarding web use of NGDOs to disclose relevant information and analyzing the influence of online transparency on organizational efficiency.
Article
Non-governmental organizations (NGOs) are pivotal actors in international affairs. They manage billions of dollars in funding, work all around the world, and shape global policies and standards. It thus comes as no surprise that the subject of accountability has drawn the interest of an increasing number of scholars across disciplines. Though there seems to be agreement about its desirability, accountability is also described as chameleon-like and ambiguous. And despite calls for more cross-disciplinary learning and conceptual clarity, there does not exist a comprehensive review of accountability conceptualizations across and within disciplines, or how the different meanings relate to each other. Based on the conceptual review of 217 research articles published within the last twenty years, this study identifies and analyzes conceptualizations of accountability in the major journals of five engaged disciplines: accounting, development studies, international relations and political science, organization studies and management, and public administration. Integrating this broad scholarship reveals that: (1) there exist 113 different conceptualizations of accountability, 90 of which are rarely used and appear in less than 5 percent of all analyzed articles, (2) scholars have used forty-three different conceptualizations in 2019 compared to seventeen conceptualizations in 2009, (3) many conceptualizations refer to same phenomena by different name (duplication), and different phenomena by the same name (conflict), and that (4) conceptual ambiguity contributes to ambiguity among the forty different terms used to measure and operationalize accountability. These findings illustrate a lack of cross-disciplinary learning and accumulation of knowledge, and suggest that new conceptualizations be introduced only if one or more of the 113 existing ones don't already capture an idea sufficiently. The purpose of this article is to serve as a concept map for scholars when debating and charting new directions for the study of accountability.
Article
The largest charity‐ratings organization evaluates thousands of charities with combined annual donations of $100 billion. Because charities' initial rating occurs at different times, in random order, I can estimate how the introduction of the ratings affects giving. Donations decrease by 5%–9%, on average. The pattern is intuitive: Donations to highest‐rated (4‐star) charities are stable. Yet for each consecutive star lower, donations decrease, with 1‐star charities losing 12%–14%. I also impute each charity's ratings for years before being rated determine the effect of prior information. Annual losses for the rated charities are approximately $2 billion. Several reasons for the losses are discussed including salience of information, donor expectations, and charity visibility.
Article
State restrictions on nongovernmental organizations (NGOs) have become increasingly pervasive across the globe. Although this crackdown has been shown to have a negative impact on public funding flows, we know little about how it affects private philanthropy. How does information about crackdown abroad, as well as organizational attributes of nonprofits, affect individual donors’ willingness to donate internationally? Using a survey experiment, we find that learning about repressive NGO environments increases generosity in that already-likely donors are willing to donate substantially more to legally besieged nonprofits. This generosity persists when mediated by two organizational-level heuristics: NGO issue areas and main funding sources. We discuss the implications of our results on how nonprofits can use different framing appeals to increase fundraising at a time when traditional public donor funding to such organizations is decreasing.
Preprint
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In den letzten Jahrzehnten hat das Streben nach Effizienz und Effektivität des Managements viele öffentliche und zivilgesellschaftliche Organisationen verändert. Viele öffentliche Organisationen – wie z.B. die deutschen öffentlichen Universitäten im oben beschriebenen Fall – haben sich im Zuge der New Public Management Reformen als eigenständige Einheiten neu organisiert. Eine solche Umstrukturierung hat die Chance erhöht, dass kontextspezifische Management- und Führungspraktiken eingeführt werden. So können die öffentlichen Universitäten nun beispielsweise freier über die Verwendung der Mittel entscheiden. Die Umstrukturierung hat jedoch auch die Notwendigkeit erhöht, dass die Organisationen ihre Leistungen managen und darüber berichten, um somit langfristig ihre Reputation gegenüber externen Stakeholdern aufzubauen. Dies können sie erreichen, indem sie das richtige Maß an Transparenz wahren und ihren Stakeholdern gegenüber Rechenschaft ablegen. Öffentliche Universitäten bemühen sich nun mehr um ihr Image, z.B. indem sie Hochglanzbroschüren drucken und ihre Jubiläen feiern. Gleichzeitig wird von ihnen mehr Transparenz bezüglich ihrer Prozesse und Wirkungsbereiche erwartet. Wenn zivilgesellschaftliche Organisationen für den Staat die Erbringung öffentlicher Leistungen übernehmen, dann geschieht dies zunehmend auf Basis von Leistungsverträgen mit komplexen Leistungs- und Zielvereinbarungen. Infolgedessen ist bei zivilgesellschaftlichen Organisationen die Notwendigkeit gestiegen, ihre Leistung, ihre Reputation, ihre Transparenz und ihre Rechenschaftspflicht gegenüber staatlichen Akteuren zu verwalten und zu steuern. Auch die Erwartungen privater Geldgeber/innen sind gestiegen, weil Skandale im Zusammenhang mit dem Missbrauch von Spendengeldern Spender/innen sensibilisiert haben (in Österreich z.B. der berüchtigteWorld Vision Skandal von 1998, der schließlich zur Einführung des österreichischen Spendengütesiegels führte). Aktuelle Trends in Richtung Venture Philanthropy und Impact Investment haben die Anforderungen privater Geldgeber/innen in Hinblick auf die Rechenschaftslegung von NPOs weiter erhöht.
Article
This study tests the association between various stakeholder groups and whether nonprofit organizations (NPOs) have obtained accountability accreditation. In particular, the study intends to answer the following research questions: (1) Does the governance of an NPO have any impact on the likelihood that the organization obtains certification? (2) Does an NPO’s investment in executives affect certification efforts? (3) Does employing a professional fundraiser play a significant role in whether an organization seeks accreditation? and (4) Are certification efforts influenced by the relative sophistication of donors of the NPO? The findings of this study indicate that organizations with strong internal governance (indicated by their answers to the governance-related questions in Form 990) are more likely to have obtained certification when compared to a group of nonprofits that did not receive the certification. In addition, nonprofits that invest more in their executives are more likely to receive SFX certification. Interestingly, external stakeholders (donors making restricted gifts, and professional fundraisers) are not associated with the likelihood of holding the SFX certification. Journal of Public Budgeting, Accounting & Financial Management
Article
Are potential contributors more likely to support a prosocial cause when presented with few contribution options or with many options? Across four studies—an analysis of archival contribution data from the crowdfunding site Kickstarter, a field experiment conducted in cooperation with a grocery store and a snack bar company, and two controlled laboratory experiments—we consistently find that when a fundraiser offers more options to potential contributors, the likelihood of contribution initially decreases and then increases. The result is a U-shaped relationship between the number of contribution options and contribution likelihood. We do not find such an effect for non-prosocial choices. With a fifth study, we offer a preliminary and tentative theoretical explanation for the U-shaped relationship, suggesting that the type of information processing by the decision maker (intuitive rather than deliberate) underlies this effect.
Chapter
This chapter advances the argument that development NGOs are ideal candidates to fill the cosmopolitan agency gap. Many international NGOs envision a world without poverty and have decades of experience and extensive expertise in poverty reduction and development. Moreover, they have built a good reputation in the global North and are skilled at engaging the general public. I examine the history of five NGOs to represent the sector and three global events that NGOs have organised to evidence their competence. However, I also caution against over-simplification and undue optimism: NGOs have tried to advocate radical change for decades to little avail. I agree with many NGO practitioners that change to this sector is necessary, before real change can happen to global poverty.
Article
In the absence of a statutory instrument to enforce payment of a regulatory fee, regulators must rely on a combination of “carrots” and “sticks” to encourage financial contributions by the organizations they oversee. In contrast to studies of public funding of nonprofits, this article empirically evaluates the effectiveness of a government policy to rely on nonprofit funding of statutory regulation. The authors exploit a sharp discontinuity in the eligibility threshold for charities contributing to the new Fundraising Regulator in England and Wales to estimate a causal effect of the levy on participation. The article shows that the regulator's threat to “name and shame” was effective at incentivizing regulatory participation and generating income, but it raises some concerns about the long‐term viability of this approach. The results are significant at a time when many jurisdictions are considering how best to fund the regulation of nonprofits.
Article
We develop the concept of the nonprofit data environment as all data collected and reported in a country resulting from law implemented into practice. We map data environments across 20 countries and propose explanations for differences between the information nongovernmental organizations report (collected) and what is made publicly available (reported). Domestic factors including regime type, civil society autonomy, and regulatory quality increase the amount of information collected and released publicly. Exposure to international political forces, including aid flows and globalization, increases the gap, which runs counter to expectations of greater openness with global engagement. Our findings point to the need for a better understanding of patterns in non-profit organizations (NPOs) data environments; while all governments collect information, countries with similar legal codes have widely varying data environments. This matters for NPOs as their ability to learn and improve depends on access to quality data and coincides with a feared global political backlash.
Article
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Although accountability systems are established to ensure organizational adherence to financial and ethical standards for nonprofit organizations, the reality of whether such standards make a difference to donors has not been measured. This article discusses the current landscape of accountability systems and accountability ratings and describes a model for estimating the effect of ratings systems on donor behavior within the theoretical context of information asymmetry. Hypotheses are tested with nonprofit ratings for New York charities from the Better Business Bureau's Wise Giving Alliance to estimate the effect of accountability ratings on the amount of contributions an organization receives. Results indicate that the Wise Giving Alliance "pass" ratings have a statistically significant effect on the contributions received; however, "did not pass" ratings are nonsignificant. The study is important for academics as well as practitioners who are monitoring time and money spent on accountability issues.
Article
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Whether accounting measures of administrative efficiency affect donations is an important issue for nonprofit managers. Prior research is inconclusive. Some studies find a significant negative relation, whereas others find no significant relation. The authors investigate a variety of reasons for the prior divergent results. The evidence is consistent with donors reducing contributions to organizations reporting higher administrative expense ratios when the ratios are presumably most relevant and reliable. The authors suggest that certain prior studies failed to find significant associations largely because their samples contained many organizations for which the administrative ratios were unreliable or not helpful for donor needs. Model specification issues also affect prior studies but are less critical than sample composition. When the authors replicate prior studies on samples containing established, donation-dependent organizations with nontrivial amounts of fund-raising and administrative expenses, they generally detect a significant negative association.
Article
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Losses due to fraudulent activities are particularly troublesome in the nonprofit sector because they directly reduce resources available to address tax-exempt purposes. The ensuing bad publicity also may reduce contributions and grants in subsequent periods. This article uses data provided by Certified Fraud Examiners to report on the types of fraud they identified in nonprofit organizations and the characteristics of both the victims and the perpetrators of the fraudulent activities. Based on the analysis of the data, the authors suggest ways that fraud losses can be prevented or mitigated. In particular, governing boards are urged to consider important controls in addition to the annual financial statement audit.
Article
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Agency theory has long been studied in the corporate setting and used to explain performance in management and in boards of directors. However, little has been done to extend this research into the area of not-for-profits. Using data collected from member institutions of the Council of Independent Colleges, relationships between boards of trustees and presidential demography and institutional performance were examined. Data were analyzed using panel regression with a separate panel for each year’s data and for each of the responding schools. Using revenue and gift income as dependent variables, it was found that increases in the size, average tenure, and level of business executive background on a board led to subsequent increases in performance for the institution. Diversity of the board had mixed results, whereas presidential tenure improved performance. These findings partially support the hypotheses and extend the explanatory reach of agency theory into the not-for-profit sector.
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Recently, there has been a proliferation of measures responding to demands for accountability and transparency. Using the example of media rankings of law schools, this article argues that the methodological concept of reactivity-the idea that people change their behavior in reaction to being evaluated, observed, or measured-offers a useful lens for disclosing how these measures effect change. A framework is proposed for investigating the consequences, both intended and unintended, of public measures. The article first identifies two mechanisms, self-fulfilling prophecy and commensuration, that induce reactivity and then distinguishes patterns of effects produced by reactivity. This approach demonstrates how these increasingly fateful public measures change expectations and permeate institutions, suggesting why it is important for scholars to investigate the impact of these measures more systematically.
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Although it is evident in routine decision-making and a crucial vehicle of rationalization, commensuration as a general social process has been given little consideration by sociologists. This article defines commensuration as the comparison of different entities according to a common metric, notes commensuration's long history as an instrument of social thought, analyzes commensuration as a mode of power, and discusses the cognitive and political stakes inherent in calling something incommensurable. We provide a framework for future empirical study of commensuration and demonstrate how this analytic focus can inform established fields of sociological inquiry.
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This paper provides a framework to analyze the implicit or explicit behavioral theories found in laws, regulations, and programs. The analysis focuses on policy tools or instruments and the underlying behavioral assumptions that guide their choice. We begin with the premise that public policy almost always attempts to get people to do things they otherwise would not have done, or it enables them to do things they might not have done otherwise. Policy tools are used to overcome impediments to policy-relevant actions. The five broad categories of tools we identify--authority, incentives, capacity-building, symbolic and hortatory, and learning--make different assumptions about how policy relevant behavior can be fostered. We contend that policy tools are essentially political phenomena, and that policy participation in the form of compliance, utilization, and other forms of "coproduction" is an important form of political behavior deserving of greater attention by political science.
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This article challenges a normative assumption about accountability in organizations: that more accountability is necessarily better. More specifically, it examines two forms of "myopia" that characterize conceptions of accountability among service-oriented non-profit organizations: (a) accountability as a set of unconnected binary relationships rather than as a system of relations and (b) accountability as short-term and rule-following behavior rather than as a means to longer-term social change. The article explores the effects of these myopias on a central mechanism of accountability in organizations—evaluation—and proposes a broader view of accountability that includes organizational learning. Future directions for research and practice are elaborated.
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The most comprehensive efforts to develop a new evolutionary approach to law are found in the work of Nonet and Selznick in the United States and Habermas and Luhmann in Germany. While these theorists are concerned with a common problem-the crisis of formal rationality of law-they differ drastically in their accounts of the problem and their vision of the future. This paper tries to resolve these differences by first decomposing and then restructuring the diverse neo-evolutionary models. Using a more comprehensive model of socio-legal covariation, the author identifies an emerging kind of legal structure which he calls reflexive law. Reflexive law is characterized by a new kind of legal self-restraint. Instead of taking over regulatory responsibility for the outcome of social processes, reflexive law restricts itself to the installation, correction, and redefinition of democratic self-regulatory mechanisms. The author identifies areas of private law in which reflexive solutions are arguably emerging, and he spells out the consequences which a concern for reflexivity has for a renewed sociological jurisprudence.
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This paper analyzes, from a cross-national perspective, publicized incidents of wrongdoing by nongovernmental organizations (NGOs). A content analysis of media reports of scandals over the past four years involving NGOs was conducted to identify issues and trends in governance and management problems. The analysis is confined to NGOs that are involved in the financing and/or delivery of health and human services in order to facilitate comparisons. International and U.S. cases of wrongdoing, covering the gamut of embezzlement to mismanagement, are identified and the common elements and unique features of these cases are examined. The underlying problems that allowed these cases to occur and their implications in regard to NGO credibility and public trust are identified and options for enhancing accountability explored.
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This article examines the trust hypothesis: the claim that asymmetric information can explain the existence of non-profit enterprise in certain markets. We argue that this hypothesis, in order to be viable, has to meet three challenges: ‘reputational ubiquity’, ‘incentive compatibility’ and ‘adulteration’. Drawing on modern agency theory, we conclude that the trust hypothesis stands on shaky ground. It can be sustained only under particular conditions that have been neither carefully described in theory nor subject to empirical assessment. The available evidence, patchy and inadequate as it is, seems to suggests that there are some ownership-related differences in aspects of organisational performance connected with asymmetric information. However, there is little evidence that this relates to trustper se or provides a rationale for the existence of non-profit ownership in these industries. We conclude with a plea for substantial research on consumer expectations and provider motivations.
Article
This article discusses the application of the term 'accountability' in nonprofit organizations. The term is frequently described as the means by which individuals and organizations report to a recognized authority and are held responsible for their actions or as the process of holding actors responsible for actions. This perspective focuses on accountability as being external to an organizational actor, in that an external principal holds an agent to account. This internal dimension of accountability is motivated by a felt responsibility as expressed through individual action and organizational mission. Accountability relationships are complicated by the fact that organizations often deal with competing accountability demands from patrons and donors, clients and beneficiaries, and internally to themselves in the sense of responsibility to mission and staff. Given that many nonprofit organizations are simultaneously accountable to numerous actors, these relations may be said to form a system of accountability. It is easy to overstate the potential benefits of outcome measurement, especially in terms of organizational learning. Proponents contend that it provides superior information as part of a system in which information is fed back into planning systems and goals.
Article
Voluntary programs have become widespread tools for governments and nongovernmental actors looking to improve industry's environmental and regulatory performance. Voluntary programs can be conceptualized as club goods that provide nonrival but potentially excludable benefits to members. For firms, the value of joining a green club over taking the same actions unilaterally is to appropriate the club's positive brand reputation. Our analysis of about 3,700 U.S. facilities indicates that joining ISO 14001, an important nongovernmental voluntary program, improves facilities' compliance with government regulations. We conjecture that ISO 14001 is effective because its broad positive standing with external audiences provides a reputational benefit that helps induce facilities to take costly progressive environmental action they would not take unilaterally.
Article
This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of 'ownership' and 'control.' Such separation of decision and risk bearing functions is also common to organizations like large professional partnerships, financial mutuals and nonprofits. We contend that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling the implied agency problems. In particular, the contract structures of all these organizations separate the ratification and monitoring of decisions from the initiation and implementation of the decisions.
Book
How can nonprofit organizations and NGOs demonstrate accountability to stakeholders and show that they are using funds appropriately and delivering on their promises? Many nonprofit stakeholders, including funders and regulators, have few opportunities to observe nonprofit internal management and policies. Such information deficits make it difficult for 'principals' to differentiate credible nonprofits from less credible ones. This volume examines a key instrument employed by nonprofits to respond to these challenges: voluntary accountability clubs. These clubs are voluntary, rule-based governance systems created and sponsored by nongovernmental actors. By participating in accountability clubs, nonprofits agree to abide by certain rules regarding internal governance in order to send a signal of quality to key principals. Nonprofit voluntary programs are relatively new but are spreading rapidly across the globe. This book investigates how the emergence, design, and success of such initiatives vary across a range of sectors and institutional contexts in the United States, the Netherlands, Africa, and Central Europe.
Article
Which SUVs are most likely to rollover? What cities have the unhealthiest drinking water? Which factories are the most dangerous polluters? What cereals are the most nutritious? In recent decades, governments have sought to provide answers to such critical questions through public disclosure to force manufacturers, water authorities, and others to improve their products and practices. Corporate financial disclosure, nutritional labels, and school report cards are examples of such targeted transparency policies. At best, they create a light-handed approach to governance that improves markets, enriches public discourse, and empowers citizens. But such policies are frequently ineffective or counterproductive. Based on an analysis of eighteen U.S. and international policies, Full Disclosure shows that information is often incomplete, incomprehensible, or irrelevant to consumers, investors, workers, and community residents. To be successful, transparency policies must be accurate, keep ahead of disclosers' efforts to find loopholes, and, above all, focus on the needs of ordinary citizens. © Archon Fung, Mary Graham, and David Weil 2007 and Cambridge University Press, 2009.
Article
Andreas Ortmann and Mark Schlesinger, in their article “Trust, Repute, and the Role of Nonprofit Enterprise,” examine what they term “the trust hypothesis,” namely “the claim that asymmetric information in the markets for certain goods and services can explain the existence of nonprofit enterprise in those markets” (this volume). There is much that is sensible in what they say, and they have performed a valuable service in pulling together some of the more recent empirical literature on asymmetric information in markets heavily populated with nonprofit firms. I have some concerns, however, both with respect to the authors’ formulation of the trust hypothesis and with their approach to its verification.
Article
This paper focuses on a radical change, in which organizations abandon an institutionalized template for arranging their core activities, that is likely to occur in organizational fields that have strong, local market forces and strong but heterogeneous institutional forces. We examine the role of market forces and heterogeneous institutional elements in promoting divergent change in core activities among all U.S. rural hospitals from 1984 to 1991. Results support the view that divergent change depends on both market forces (proximity to competitors, disadvantages in service mix) and institutional forces (state regulation, ownership and governance norms, and mimicry of models of divergent change).
Article
There has been much talk in recent years of a "crisis of confidence in charities" in the United States. This article presents a conceptual framework for analyzing the issue and reviews attitudinal and behavioral data relevant to public confidence in the nonprofit sector generally and major nonprofit subsectors. The article concludes that the "crisis of confidence" hypothesis is not supported by the evidence.
Article
A large body of research has examined the effect of government subsidies to nonprofit organizations on philanthropy, with the preponderance of evidence suggesting that government funding partially displaces or “crowdsout”private giving. Such studies assume that charitable donors are aware of the amount of government funding received by their beneficiary charitable organizations and that they act on this information when determining how much money to donate. This study assesses the validity of these heretofore untested assumptions. After comparing the “best guesses” of survey respondents (N = 675) to the actual amount of government funding received by the charitable organizations to which they have donated money, the assumption of donors’ knowledge about government funding is found to be met only very weakly. Furthermore, few respondents anticipate changing giving behavior due to government subsidies. These findings suggest the need to explore explanations of crowding out beyond those assumed under current theory.
Article
This article provides an in-depth case study of the process by which a funder evaluates the performance of a client nonprofit agency in the social services sector. The connection between the evaluation and the subsequent funding decision is also explored. A framework for uncovering the basic dimensions of the evaluation process is presented and applied to the evaluator-evaluatee relationship studied. Various points at which perceptions of the relationship got distorted are identified. The evaluation process was found to be a subtle and complex interaction of formally rational methods and nonformal subjective judgments. The implications of these findings for practical improvements to the evaluation process are discussed.
Article
This paper relates quality and uncertainty. The existence of goods of many grades poses interesting and important problems for the theory of markets. On the one hand, the interaction of quality differences and uncertainty may explain important institutions of the labor market. On the other hand, this paper presents a struggling attempt to give structure to the statement: “Business in under-developed countries is difficult”; in particular, a structure is given for determining the economic costs of dishonesty. Additional applications of the theory include comments on the structure of money markets, on the notion of “insurability,” on the liquidity of durables, and on brand-name goods.
Article
Property in transition (Book I, chapter 1) …The typical business unit of the 19th century was owned by individuals or small groups; was managed by them or their appointees; and was, in the main, limited in size by the personal wealth of the individuals in control. These units have been supplanted in ever greater measure by great aggregations in which tens and even hundreds of thousands of workers and property worth hundreds of millions of dollars, belonging to tens or even hundreds of thousands of individuals, are combined through the corporate mechanism into a single producing organization under unified control and management.… Such an organization of economic activity rests upon two developments, each of which has made possible an extension of the area under unified control. The factory system, the basis of the industrial revolution, brought an increasingly large number of workers directly under a single management. Then, the modern corporation, equally revolutionary in its effect, placed the wealth of innumerable individuals under the same central control. By each of these changes the power of those in control was immensely enlarged and the status of those involved, worker or property owner, was radically changed. The independent worker who entered the factory became a wage laborer surrendering the direction of his labor to his industrial master. The property owner who invests in a modern corporation so far surrenders his wealth to those in control of the corporation that he has exchanged the position of independent owner for one in which he may become merely recipient of the wages of capital.
Article
Globalization critics argue that international trade spurs a race to the bottom among national environmental standards. ISO 14001 is the most widely adopted voluntary environmental regulation which encourages firms to take environmental action beyond what domestic government regulations require. Drawing on a panel study of 108 countries over seven years, we investigate conditions under which trade linkages can encourage ISO 14001 adoption, thereby countering environmental races to the bottom. We find that trade linkages encourage ISO 14001 adoption if countries' major export markets have adopted this voluntary regulation.
Article
Objective: The aim of this study was to examine the effects of provider profiling on bypass surgery access and outcomes in elderly patients in New York. Background: Since 1989, New York (NY) has compiled provider-specific bypass surgery mortality reports. While some have proposed that "provider profiling" has led to lower surgical mortality rates, critics have suggested that such programs lower in-state procedural access (increasing out-of-state transfers) without improving patient outcomes. Methods: Using national Medicare data, we examined trends in the percentages of NY residents aged 65 years or older receiving out-of-state bypass surgery between 1987 and 1992 (before and after program initiation). We also examined in-state procedure use among elderly myocardial infarction patients during this period. Finally, we compared trends in surgical outcomes in NY Medicare patients with those for the rest of the nation. Results: Between 1987 and 1992, the percentage of NY residents receiving bypass out-of-state actually declined (from 12.5% to 11.3%, p < 0.01 for trend). An elderly patient's likelihood for bypass following myocardial infarction in NY increased significantly since the program's initiation. Between 1987 and 1992, unadjusted 30-day mortality rates following bypass declined by 33% in NY Medicare patients compared with a 19% decline nationwide (p < 0.001). As a result of this improvement, NY had the lowest risk-adjusted bypass mortality rate of any state in 1992. Conclusions: We found no evidence that NY's provider profiling limited procedure access in NY's elderly or increased out-of-state transfers. Despite an increasing preoperative risk profile, procedural outcomes in NY improved significantly faster than the national average.
Article
The major arguments of this paper are that there is a need for an integrating framework for the study of regulation, including the design of regulatory institutions, and that the theory of agency may provide such a framework. The paper provides a brief overview of this approach. The theory of agency is a general theory of social relationships of “acting for” that is now under development in several disciplines, particularly economics and accounting. Regulation is seen as a generic relation observed widely in social behavior, and as a particular type of agency relationship. The problems of agency relations–e.g., the problems of principals in controlling agents and of agents in acting according to the principals' desires–have their counterparts in regulation.
Article
This chapter examines the effects that watchdog agency evaluations of nonprofit organizations have on private donations.
Article
Today, the annual IRS Form 990 tax filing is the principal annual disclosure mechanism of nonprofit organizations. Over time, considerable thought has been put into finding ways to improve access and use of the 990 Form, with only scant attention focused on whether the 990 is the right data source on which to build a system of nonprofit accountability. This paper takes a broader perspective, assessing not only the quality of the financial data and its availability, but also the entire financial reporting model. The paper begins with a framework for thinking about organizational accountability. It then examines the current structure of nonprofit financial reporting and contrasts it with alternative systems developed for publicly traded firms and credit unions. The paper concludes with recommendations for improving nonprofit accountability by reengineering the reporting and oversight systems in the sector.
Article
Self-regulation is an increasing mandate in American nonprofit life, but the new focus on self-regulation is not limited to the United States. Nonprofit self-regulation is expanding rapidly in Asia as an expression of collective action to defend against encroaching and increasing state pressures; to strengthen the quality of sectoral governance, services, financial management, and fundraising; to improve public, corporate, media, and other perceptions of nonprofits and charities; to organize an unruly sphere and marginalize lower quality actors or other outliers; to access governmental or donor funding; to act as a market mechanism to exclude competitive or unproductive actors for the benefit of remaining players or to marginalize organizations causing reputational damage to the sector; as a learning opportunity for nonprofits and their networks; and as a means to clarify and strengthen shared identity. This article analyzes the rapid development and forms of nonprofit self-regulation in Cambodia, India, Pakistan, and the Philippines and the motivations behind this rapid growth.
Article
The law school rankings published by US News and World Report have changed and continue to change the law school world, affecting both the demand and supply sides of legal education. Are the rankings valid? Are they changing schools for the better? The US News rankings mislead both applicants and law schools. As measures of educational quality, the US News rankings are seriously flawed. They overweight criteria that matter little, such as bar pass rate. They exclude criteria that matter greatly, such as job satisfaction. At least two of the seemingly valid criteria incorporated into the US News rankings are illusory; the reputation surveys done by US News do not tap into independent professional opinion but instead measure opinions that are echos of US News and, thus, add little reliability to the results that would be reached on other criteria. A more serious problem is the effect of US News rankings on the operation of law schools and students who desire admission. The rankings have created incentives for students who want to be lawyers to go to schools that have grade inflation and take easy courses at those schools. The US News rankings have created incentives for schools to teach to the bar exam, spend money on glossy publications, raise tuition, increase the number of transfer students, and admit students according to their bubble ability (their aptitude for taking multiple-choice standardized exams) rather than their prospects for contributing to the learning environment at the law school or their prospects for becoming effective and responsible lawyers.
Chapter
The Problem to be ExaminedThe Reciprocal Nature of the ProblemThe Pricing System with Liability for DamageThe Pricing System with No Liability for DamageThe Problem Illustrated AnewThe Cost of Market Transactions Taken into AccountThe Legal Delimitation of Rights and the Economic Problem
Article
This article examines several of the key hypotheses suggested by the race to the bottom theory in environmental regulation. The research studies annual state-level enforcement of federal air, water, and hazardous waste pollution control regulation, covering the period from 1985 to 2000. Specifically, the study estimates a series of strategic interaction models to examine whether a state's environmental regulatory behavior is influenced by the regulatory behavior of the states with which it competes for economic investment. While there is clear evidence of strategic interaction in state environmental regulatory behavior, states do not respond in the asymmetric manner suggested by the race to the bottom theory.
Article
In this article we examine how information problems can cause agency slippages and lead to governance failures in nonprofit organizations. Drawing on the principal–agent literature, we provide a theoretical account of an institutional mechanism, namely, voluntary regulation programs, to mitigate such slippages. These programs seek to impose obligations on their participants regarding internal governance and use of resources. By joining these programs, nonprofit organizations seek to differentiate themselves from nonparticipants and signal to their principals that they are deploying resources as per the organizational mandate. If principals are assured that agency slippages are lower in program participants, they might be more likely to provide the participants with resources to deliver goods and services to their target populations. However, regulatory programs for nonprofit organizations are of variable quality and, in some cases, could be designed to obscure rather than reveal information. We outline an analytical framework to differentiate the credible clubs from the “charity washes.” A focus on the institutional architecture of these programs can help to predict their efficacy in reducing agency problems.
Article
Regulatory transparency-mandatory disclosure of information by private or public institutions with a regulatory intent-has become an important frontier of government innovation. This paper assesses the effectiveness of such transparency systems by examining the design and impact of financial disclosure, nutritional labeling, workplace hazard communication, and five other diverse systems in the United States. We argue that transparency policies are effective only when the information they produce becomes “embedded” in the everyday decision-making routines of information users and information disclosers. This double-sided embeddedness is the most important condition for transparency systems' effectiveness. Based on detailed case analyses, we evaluate the user and discloser embeddedness of the eight major transparency policies. We then draw on a comprehensive inventory of prior studies of regulatory effectiveness to assess whether predictions about effectiveness based on characteristics of embeddedness are consistent with those evaluations. © 2006 by the Association for Public Policy Analysis and Management
Article
The annual Internal Revenue Service Form 990 tax filing is the principal disclosure mechanism for nonprofit organizations. Although considerable efforts have been made to improve the accuracy and accessibility of Form 990, questions remain as to whether this data source is the most desirable foundation for a system of nonprofit accountability. Taking a broad perspective on financial accountability, this article assesses not only the quality and availability of the financial data, but also the entire financial–reporting model. The article develops a framework for thinking critically about nonprofit financial accountability. After examining the current structure of nonprofit financial reporting and contrasting it with alternative systems developed for other industries, the article concludes with recommendations for reengineering nonprofit financial accountability.
Book
Governments in recent decades have employed public disclosure strategies to reduce risks, improve public and private goods and services, and reduce injustice. In the United States, these targeted transparency policies include financial securities disclosures, nutritional labels, school report cards, automobile rollover rankings, and sexual offender registries. They constitute a light-handed approach to governance that empowers citizens. However, as Full Disclosure shows these policies are frequently ineffective or counterproductive. Based on a comparative analysis of eighteen major policies, the authors suggest that transparency policies often produce information that is incomplete, incomprehensible, or irrelevant to the consumers, investors, workers, and community residents who could benefit from them. Sometimes transparency fails because those who are threatened by it form political coalitions to limit or distort information. To be successful, transparency policies must place the needs of ordinary citizens at centre stage and produce information that informs their everyday choices.
Article
Voluntary environmental programs are codes of progressive environmental conduct that firms pledge to adopt. This paper investigates whether ISO 14001, a voluntary program with a weak sword-a weak monitoring and sanctioning mechanism-can mitigate shirking and improve participants' environmental performance. Sponsored by the International Organization for Standardization (ISO), ISO 14001 is the most widely adopted voluntary environmental program in the world. Our analysis of over 3,000 facilities regulated as major sources under the U.S. Clean Air Act suggests that ISO 14001-certified facilities reduce their pollution emissions more than non-certified facilities. This result persists even after controlling for facilities' emission and regulatory compliance histories as well as addressing potential endogeneity issues between facilities' environmental performance and their decisions to join ISO 14001. © 2005 by the Association for Public Policy Analysis and Management
Article
This article discusses: the doctrinal content of the group of ideas known as ‘new public management’(NPM); the intellectual provenance of those ideas; explanations for their apparent persuasiveness in the 1980 s; and criticisms which have been made of the new doctrines. Particular attention is paid to the claim that NPM offers an all-purpose key to better provision of public services. This article argues that NFM has been most commonly criticized in terms of a claimed contradiction between ‘equity’ and ‘efficiency’ values, but that any critique which is to survive NPM's claim to ‘infinite reprogrammability’ must be couched in terms of possible conflicts between administrative values. The conclusion is that the ESRC'S Management in Government’ research initiative has been more valuable in helping to identify rather than to definitively answer, the key conceptual questions raised by NPM.
Article
We estimate the responsiveness of donations to a number of economic variables, including price, advertising, and the availability of revenue from such other sources as government grants and program service sales. Utilizing a set of IRS data on individual nonprofit organizations in each of seven industries — including hospitals and higher education — for the years 1982–1994, we find distinct overall patterns as well as notable variation across industries. A nonprofit organization’s fundraising expenditures are estimated to exert two countervailing effects on donations — the direct, advertising and information, effect augments donations, while the indirect effect, on the ‘price’ of donating, has a negative effect. We do not find evidence that fundraising is carried to the profit-maximizing levels. In some industries fundraising is substantially short of that level, while in other industries it is excessive, implying that the marginal return to fundraising is exceeded by the cost. Focusing on whether revenue from other sources affects donations to a nonprofit organization, we find evidence that revenue from either government grants or from the organization’s own program sales activity generally does not crowd-out private donations. To the contrary, in most industries there are significant positive effects.
Article
There is growing academic and policy-level interest in the use of information as quasi-regulatory mechanisms, such as toxic release inventory (TRI) and “green labels.” Mandatory disclosure requirements have been touted as “market-based incentives” that may affect firm behavior. We provide new evidence on the effectiveness of disclosure requirements by examining firm behavior in response to disclosures of TRI emissions. We find that firms with the largest stock price decline on the day this information became public subsequently reduced emissions more than their industry peers. This is consistent with the view that financial markets may provide strong incentives for firms to change their environmental behavior.
Article
Information disclosure regulations are increasingly common, but their effects on the behavior of regulated firms are unclear. The 1996 Amendments to the Safe Drinking Water Act mandated that community drinking water suppliers issue to customers annual consumer confidence reports (CCRs), containing information on violations of drinking water regulations and on observed contaminant levels. We examine the impact of mandatory information provision on drinking water violations by 517 community water systems in the Commonwealth of Massachusetts from 1990 to 2003. Results suggest that larger utilities required to mail CCRs directly to customers reduced total violations by between 30% and 44% as a result of this policy, and reduced the more severe health violations by 40–57%.