Abstract
CEO power and its implications are neglected in research on nonprofit governance. This is surprising considering the crucial role of CEOs and the importance of power analysis in understanding governance. This article addresses this gap by developing a two-dimensional framework for conceptualizing CEOs’ structural power and individual power in nonprofits, and proposes several indicators to operationalize these two kinds of power. Drawing on data from a survey of 163 CEOs of Chinese foundations, this study is among the first to specifically assess how much power a CEO has and the relationship between CEO power and nonprofit performance. The findings suggest that CEOs’ structural power has a double-edged effect on nonprofit financial performance: It is positively associated with public support but also increases overhead costs.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
As Zhang et al. (2011) claim, nonprofit governance can be generally “defined at the organizational level and involves a volunteer board of directors and a chief executive.”
How to measure nonprofit performance is a highly controversial topic and using financial measures is just one approach. On the one hand, one could argue that financial performance is not the main objective of nonprofits, but on the other hand, financial indicators have been consistently used in the previous literature to measure nonprofit performance. See more discussion as follows.
If we translate the term directly into English, the CEO of a philanthropic foundation in China is called the “secretary general,” but this article follows most of the nonprofit literature and uses the term “CEO.”
As early as 1932, Berle and Means (1932) argued that in modern business corporations, a separation of ownership from control was transferring power from owners to managers, making the manager the controlling figure in the corporation. Later Burnham (1941) coined the concept of “managerial revolution” and claimed that not only for-profit companies, but all other significant organizations such as state agencies would be dominated by managerial professionals pursuing their own interests (Scott and Marshall, 2009).
Some changes have been made to the dual registration system. A significant one is that the Ministry of Civil Affairs of China released a new draft of the “Regulations on the Registration and Administration of Social Organizations” in August 2018, which specify that four types of NGOs could directly register with the Ministry of Civil Affairs without being approved by professional supervisory agencies, including (1) trade associations and chambers of commerce, (2) NGOs working for science, engineering, and technology, (3) NGOs delivering social welfare, (4) NGOs providing community service. Although the new Regulations are still a draft and have not come into effect, the direct registration of four types of NGOs has been piloted in certain regions since 2012. However, in the absence of the national-level legislation, the pace of changes and reform has been slow and cautious.
Brass (2002, p. 141) argues that structural positions do not have to be formal ones such as hierarchical levels; they can also be informal ones such as network positions. Structural power in this study, however, refers to the traditional Weberian authority coming from formal positions in hierarchical organizations, which is still one of the strongest and most taken-for-granted sources of power in our everyday life.
Ritchie and Kolodinsky (2003) review 16 financial measurements and identify 6 of them to capture three aspects of nonprofit performance: fundraising efficiency, public support, and fiscal performance. Brown (2005) includes four financial indicators to measure three dimensions of nonprofit performance: financial performance (total revenues/total expenses; total revenues—total expenses), public support (total contributions/total revenues), and fundraising efficiency (total revenues/fundraising expense).
Although my hypotheses are based on the traditional assumption that agency theory and stewardship theory are competing explanations of the role of CEOs and their managerial power, these two theories can also be understood as complementary approaches (Van Puyvelde et al. 2012). Actually, the findings of this study confirm that agency theory and stewardship theory are complementary rather than competing when it comes to understanding CEO power and its consequences (see more elaborations in the discussion section).
When we built the sample in 2016, the RICF data only contained information from the year 2013.
WeChat is the most popular social media application in China.
When I collected the data of financial performance, the variables were measured at the ordinal level. That is, when a respondent fills in the questionnaire, what he/she needs to do is to choose a number between 1 and 5 by checking a box. The reason for designing my questionnaires in this way is because I want to increase the incentive for respondents to answer every question. Imagine this: If we ask nonprofit CEOs to answer the question about public donations of their organizations, it is relatively easier for them to check between different categories than to write down a specific number.
Project 985 is a project launched by the Chinese government that involves allocating large amounts of money to the top 39 universities in China.
One finding that more than 40% of the CEOs are not the best earning people in the organization is surprising. One explanation could be that board directors, particularly the board chairs, may get higher payment than CEOs, which makes them the highest paid people.
As one reviewer pointed out, this is probably because high compensation of CEOs is both part of the structural power and the administrative costs.
Since this study is an initial attempt to explore CEO power in nonprofits and there is no such previous work providing benchmarks to compare, assessing “high” or “low” level of power is purely based on the index range (0–1).
References
Abernethy, M. A., Kuang, Y. F., & Qin, B. (2015). The influence of CEO power on compensation contract design. The Accounting Review, 90(4), 1265–1306.
Adams, R. B., Almeida, H., & Ferreira, D. (2005). Powerful CEOs and their impact on corporate performance. Review of Financial Studies, 18(4), 1403–1432.
Barnard, C. I. (1968 [1938]). The Functions of the Executive. Cambridge, MA: Harvard University Press
Berle, A. A., & Means, G. C. (1932). The modern corporation and private property. New York: Macmillan.
Block, S. R., & Rosenberg, S. (2002). Toward an understanding of founder’s syndrome: An assessment of power and privilege among founders of nonprofit organizations. Nonprofit Management and Leadership, 12(4), 353–368.
Bowman, W. (2006). Should donors care about overhead costs? do they care? Nonprofit and Voluntary Sector Quarterly, 35(2), 288–310. https://doi.org/10.1177/0899764006287219.
Bradshaw, P. (2009). A contingency approach to nonprofit governance. Nonprofit Management and Leadership, 20(1), 61–81. https://doi.org/10.1002/nml.241.
Bradshaw, P., Murray, V., & Wolpin, J. (1992). Do nonprofit boards make a difference? An exploration of the relationships among board structure, process, and effectiveness. Nonprofit and Voluntary Sector Quarterly, 21(3), 227–249.
Brass, D. J. (1984). Being in the right place: A structural analysis of individual influence in an organization. Administrative Science Quarterly, 29(4), 518–539. https://doi.org/10.2307/2392937.
Brass, D. J. (2002). Intraorganizational power and dependence. In J. A. C. Baum (Ed.), The Blackwell companion to organizations (pp. 138–157). Hoboken: Blackwell Publishers Inc.
Brass, D. J., & Burkhardt, M. E. (1993). Potential power and power use: An investigation of structure and behavior. Academy of Management Journal, 36(3), 441–470.
Brown, W. A. (2005). Exploring the association between board and organizational performance in nonprofit organizations. Nonprofit Management and Leadership, 15(3), 317–339.
Burnham, J. (1941). The managerial revolution: What is happening in the world. New York: The John Day Company.
Callen, J. L., Klein, A., & Tinkelman, D. (2003). Board composition, committees, and organizational efficiency: The case of nonprofits. Nonprofit and Voluntary Sector Quarterly, 32(4), 493–520.
Callen, J. L., Klein, A., & Tinkelman, D. (2010). The contextual impact of nonprofit board composition and structure on organizational performance: Agency and resource dependence perspectives. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 21(1), 101–125.
Chikoto, G. L., & Neely, D. G. (2014). Building nonprofit financial capacity: The impact of revenue concentration and overhead costs. Nonprofit and Voluntary Sector Quarterly, 43(3), 570–588. https://doi.org/10.1177/0899764012474120.
Combs, J. G., Ketchen, D. J., Perryman, A. A., & Donahue, M. S. (2007). The moderating effect of CEO Power on the board composition-firm performance relationship. Journal of Management Studies, 44(8), 1299–1323. https://doi.org/10.1111/j.1467-6486.2007.00708.x.
Cornforth, C. (2001). What makes boards effective? An examination of the relationships between board inputs, structures, processes and effectiveness in non-profit organisations. Corporate Governance: An International Review, 9(3), 217–227. https://doi.org/10.1111/1467-8683.00249.
Cornforth, C. (2012). Nonprofit governance research: limitations of the focus on boards and suggestions for new directions. Nonprofit and Voluntary Sector Quarterly, 41(6), 1116–1135. https://doi.org/10.1177/0899764011427959.
Daily, C. M., & Johnson, J. L. (1997). Sources of CEO power and firm financial performance: A longitudinal assessment. Journal of Management, 23(2), 97–117.
de Andrés-Alonso, P., Cruz, N. M., & Romero-Merino, M. E. (2006). The governance of nonprofit organizations: Empirical evidence from nongovernmental development organizations in Spain. Nonprofit and Voluntary Sector Quarterly, 35(4), 588–604.
Desai, A., Kroll, M., & Wright, P. (2003). CEO duality, board monitoring, and acquisition performance: A test of competing theories. Journal of Business Strategies, 20(2), 137–156.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.
Dornbusch, S. M., & Scott, W. R. (1975). Evaluation and the exercise of authority. San Francisco: Jossey-Bass.
Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.
Feng, X. (2015). China’s charitable foundations: Development and policy-related issues. Chinese Economy, 48(2), 130–154.
Finkelstein, S. (1992). Power in top management teams: Dimensions, measurement, and validation. The Academy of Management Journal, 35(3), 505–538.
Fulda, A. (2017). The contested role of foreign and domestic foundations in the PRC: Policies, positions, paradigms, power. Journal of the British Association for Chinese Studies, 7, 63–99.
Giddens, A. (1989). Constitution of society: outline of the theory of structuration. Cambridge: Polity Press.
Green, J. C., & Griesinger, D. W. (1996). Board performance and organizational effectiveness in nonprofit social services organizations. Nonprofit Management and Leadership, 6(4), 381–402. https://doi.org/10.1002/nml.4130060407.
Green, J. C., Madjidi, F., Dudley, T. J., & Gehlen, F. L. (2001). Local unit performance in a national nonprofit organization. Nonprofit management and Leadership, 11(4), 459–476. https://doi.org/10.1002/nml.11405.
Hailey, J., & James, R. (2004). “Trees Die From the Top”: international perspectives on ngo leadership development. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 15(4), 343–353. https://doi.org/10.1007/s11266-004-1236-8.
Hall, R. H., & Tolbert, P. S. (2005). Organizations: structures, processes, and outcomes (9th ed.). Upper Saddle River: Pearson Prentice Hall.
Heimovics, R. D., Herman, R. D., & Jurkiewicz, C. L. (1995). The political dimension of effective nonprofit executive leadership. Nonprofit Management and Leadership, 5(3), 233–248.
Herman, R. D., & Heimovics, R. D. (2005). Executive Leadership. In R. D. Herman & Associates (Eds.), The Jossey-Bass handbook of nonprofit leadership and management (2nd ed., pp. 153–170). San Francisco: Jossey-Bass.
Herman, R. D., & Renz, D. O. (1997). Multiple constituencies and the social construction of nonprofit organization effectiveness. Nonprofit and Voluntary Sector Quarterly, 26(2), 185–206.
Herman, R. D., & Renz, D. O. (2004). Doing things right: Effectiveness in local nonprofit organizations. A Panel Study. Public Administration Review, 64(6), 694–704.
Hildebrandt, T. (2011). The Political Economy of Social Organization Registration in China. The China Quarterly, 208, 970–989.
Hildebrandt, T. (2013). Social organizations and the authoritarian state in China. Cambridge: Cambridge University Press.
Hsu, C. L. (2010). Beyond civil society: an organizational perspective on state-NGO relations in the People’s Republic of China. Journal of Civil Society, 6(3), 259–278.
Hsu, C. L., & Jiang, Y. (2015). An institutional approach to Chinese NGOs: State alliance versus state avoidance resource strategies. The China Quarterly, 221, 100–122.
Iecovich, E., & Bar-Mor, H. (2007). Relationships between chairpersons and CEOs in nonprofit organizations. Administration in Social Work, 31(4), 21–40.
Jäger, U. P., & Rehli, F. (2012). Cooperative power relations between nonprofit board chairs and executive directors. Nonprofit Management and Leadership, 23(2), 219–236.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
Jun, K.-N., & Shiau, E. (2012). How are we doing? A multiple constituency approach to civic association effectiveness. Nonprofit and Voluntary Sector Quarterly, 41(4), 632–655. https://doi.org/10.1177/0899764011415119.
Kirk, G., & Nolan, S. B. (2010). Nonprofit mission statement focus and financial performance. Nonprofit Management and Leadership, 20(4), 473–490. https://doi.org/10.1002/nml.20006.
Kline, R. B. (2016). Principles and practice of structural equation modeling. New York: The Guilford Press.
Kramer, R. M. (1985). Toward a contingency model of board-executive relations. Administration in Social Work, 9(3), 15–33.
Liao, H., & Chuang, A. (2004). A multilevel investigation of factors influencing employee service performance and customer outcomes. The Academy of Management Journal, 47(1), 41–58.
Ma, Q. (2006). Non-governmental organizations in contemporary China: Paving the way to civil society?. New York: Routledge.
Manzo, A. N., & Burke, J. M. (2012). Increasing response rate in web-based/internet surveys. In L. Gideon (Ed.), Handbook of survey methodology for the social sciences (pp. 327–343). New York: Springer.
McGinnis Johnson, J., & Ni, N. (2015). The impact of political connections on donations to Chinese NGOs. International Public Management Journal, 18(4), 514–535.
Murray, V., Bradshaw, P., & Wolpin, J. (1992). Power in and around nonprofit boards: A neglected dimension of governance. Nonprofit Management and Leadership, 3(2), 165–182.
Oleinik, A. (2015). The Invisible hand of power: An economic theory of gate keeping. London: Pickering & Chatto.
Olson, D. E. (2000). Agency theory in the not-for-profit sector: Its role at independent colleges. Nonprofit and Voluntary Sector Quarterly, 29(2), 280–296.
Ostrower, F., & Stone, M. M. (2006). Governance: Research trends, gaps, and future prospects. In W. W. Powell & R. Steinberg (Eds.), The nonprofit sector: A research handbook (2nd ed., pp. 612–628). New Haven, CT: Yale University Press.
Ostrower, F., & Stone, M. M. (2010). Moving governance research forward: A contingency-based framework and data application. Nonprofit and Voluntary Sector Quarterly, 39(5), 901–924.
Pfeffer, J. (1981). Power in organizations. London: Pitman Publishing Inc.
Pfeffer, J. (1992). Managing with power: Politics and influence in organizations. Boston: Harvard Business School Press.
Pfeffer, J. (2009). Understanding power in organizations. In D. Tjosvold & B. Wisse (Eds.), Power and interdependence in organizations. Cambridge: Cambridge University Press.
Ritchie, W. J., & Eastwood, K. (2006). Executive functional experience and its relationship to the financial performance of nonprofit organizations. Nonprofit Management and Leadership, 17(1), 67–82. https://doi.org/10.1002/nml.131.
Ritchie, W. J., & Kolodinsky, R. W. (2003). Nonprofit organization financial performance measurement: An evaluation of new and existing financial performance measures. Nonprofit Management and Leadership, 13(4), 367–381.
Ritchie, W. J., Kolodinsky, R. W., & Eastwood, K. (2007). Does executive intuition matter? An empirical analysis of its relationship with nonprofit organization financial performance. Nonprofit and Voluntary Sector Quarterly, 36(1), 140–155. https://doi.org/10.1177/0899764006293338.
Rose-Ackerman, S. (1987). Ideals versus dollars: Donors, charity managers, and government grants. Journal of Political Economy, 95(4), 810–823.
Saidel, J. R., & Harlan, S. L. (1998). Contracting and patterns of nonprofit governance. Nonprofit Management and Leadership, 8(3), 243–259.
Scott, W. R., & Davis, G. F. (2007). Organizations and organizing: Rational, natural and open system perspectives. Upper Saddle River, NJ: Pearson Prentice Hall.
Scott, J., & Marshall, G. (2009). A dictionary of sociology. Oxford: Oxford University Press.
Shen, W., & Cannella, A. A. (2002). Power dynamics within top management and their impacts on CEO dismissal followed by inside succession. The Academy of Management Journal, 45(6), 1195–1206.
Siciliano, J. I. (1996). The relationship of board member diversity to organizational performance. Journal of Business Ethics, 15(12), 1313–1320.
Siciliano, J. I. (1997). The relationship between formal planning and performance in nonprofit organizations. Nonprofit Management and Leadership, 7(4), 387–403.
Sowa, J. E., Selden, S. C., & Sandfort, J. R. (2004). No longer unmeasurable? A multidimensional integrated model of nonprofit organizational effectiveness. Nonprofit and Voluntary Sector Quarterly, 33(4), 711–728.
Speckbacher, G. (2008). Nonprofit versus corporate governance: An economic approach. Nonprofit Management and Leadership, 18(3), 295–320.
Spires, A. J. (2007). China’s un-official civil society: The development of grassroots NGOs in an authoritarian state. (Ph.D. Dissertation), Yale University.
Spires, A. J. (2011). Contingent symbiosis and civil society in an authoritarian state: Understanding the survival of China’s grassroots NGOs. American Journal of Sociology, 117(1), 1–45.
Spires, A. J., Tao, L., & Chan, K.-M. (2014). Societal support for China’s grass-roots NGOs: Evidence from Yunnan. Guangdong and Beijing. China Journal, 71, 65–90.
Stone, M. M., & Ostrower, F. (2007). Acting in the public interest? Another look at research on nonprofit governance. Nonprofit and Voluntary Sector Quarterly, 36(3), 416–438.
Suarez, D. F. (2010). Street credentials and management backgrounds: Careers of nonprofit executives in an evolving sector. Nonprofit and Voluntary Sector Quarterly, 39(4), 696–716.
Teets, J. C. (2015). The evolution of civil society in Yunnan province: Contending models of civil society management in China. Journal of Contemporary China, 24(91), 158–175. https://doi.org/10.1080/10670564.2014.918417.
Teets, J. C. (2018). The power of policy networks in authoritarian regimes: Changing environmental policy in China. Governance, 31(1), 125–141. https://doi.org/10.1111/gove.12280.
Thompson, K. R., & Luthans, F. (1983). A behavioral interpretation of power. In R. W. Allen & L. W. Porter (Eds.), Organizational influence processes (pp. 72–86). Glenview, Illinois: Scott, Foresman and Company.
Van Essen, M., Otten, J., & Carberry, E. J. (2015). Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation. Journal of Management, 41(1), 164–202.
Van Puyvelde, S., Caers, R., Du Bois, C., & Jegers, M. (2012). The governance of nonprofit organizations: Integrating agency theory with stakeholder and stewardship theories. Nonprofit and Voluntary Sector Quarterly, 41(3), 431–451. https://doi.org/10.1177/0899764011409757.
Weber, M. (1968 [1922]). Economy and society: An outline of interpretive sociology. R. Guenther & C. Wittich (Eds.), New York: Bedminster Press.
Wei, Q. (2017). From direct involvement to indirect control? A multilevel analysis of factors influencing chinese foundations’ capacity for resource mobilization. International Journal of Voluntary and Nonprofit Organizations.. https://doi.org/10.1007/s11266-017-9924-3.
Willems, J., Andersson, F. O., Jegers, M., & Renz, D. O. (2016). A coalition perspective on nonprofit governance quality: analyzing dimensions of influence in an exploratory comparative case analysis. International Journal of Voluntary and Nonprofit Organizations. https://doi.org/10.1007/s11266-016-9683-6.
Willems, J., Boenigk, S., & Jegers, M. (2014). Seven trade-offs in measuring nonprofit performance and effectiveness. International Journal of Voluntary and Nonprofit Organizations, 25(6), 1648–1670.
Zald, M. N. (1969). The power and functions of boards of directors: A theoretical synthesis. American Journal of Sociology, 75(1), 97–111.
Zhan, X., & Tang, S.-Y. (2016). Understanding the implications of government ties for nonprofit operations and functions. Public Administration Review. https://doi.org/10.1111/puar.12515.
Zhang, P. (2013). Power and trust in board–CEO relationships. Journal of Management and Governance, 17(3), 745–765.
Zhang, C., & Guo, J. Q. (2015). I won’t listen unless you are my men? The policy influence of NGOs in authoritarian regimes, evidence from China. Working Paper.
Zhang, Z., Guo, C., & Cai, D. (2011). Governing Chinese nonprofit organizations: The promise and limits of the “Third Way”. International Review of Public Administration, 16(1), 11–30.
Zhou, X., Ai, Y., & Lian, H. (2012). The limit of bureaucratic power in organizations: The case of the Chinese bureaucracy. In D. Courpasson, D. Golsorkhi, & J. J. Sallaz (Eds.), Rethinking power in organizations, institutions, and markets (pp. 81–111). Bingley: Emerald Group Publishing.
Acknowledgements
The author would like to thank Liam Swiss, Anton Oleinik, Xueguang Zhou, and two anonymous reviewers for their comments on earlier versions of this article. All errors in this work are entirely the author’s.
Funding
No funding was received.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The author has no conflicts of interest to disclose.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Wei, Q. CEO Power and Nonprofit Financial Performance: Evidence from Chinese Philanthropic Foundations. Voluntas 32, 460–476 (2021). https://doi.org/10.1007/s11266-019-00187-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11266-019-00187-4