The impact of relative CEO compensation on not-for-profit contributions

PurposeThe authors extend research suggesting that external funders reduce their contributions to not-for-profit (NFP) organizations in response to media-reported CEO compensation levels.Design/methodology/approachEmploying a maximum archival sample of 44,807 observations from US Form 990s, the authors comprehensively assess the extent that high relative NFP CEO compensation is associated with decreases in future contributions.FindingsThe authors find that donors and grantors react negatively to high relative CEO compensation but do not react adversely to high absolute executive compensation. Contributors seem to take issue with CEO compensation when they perceive it absorbs a relatively large portion of the organizations’ total expenses, which may hinder the NFP’s mission. Additional findings suggest that excess cash held by the NFP significantly exacerbates the negative baseline relationship between future contributions and high relative CEO compensation. Finally, both individual donors and professional grantors are sensitive to cash NFP CEO compensation levels, but grantors are more sensitive to CEO noncash compensation.Research limitations/implicationsThe authors’ data are focused on larger NFP organizations, so this limits the generalizability of the study. Furthermore, survivorship bias potentially influences their time-series investigations because a current year large-scale decrease in funding due to high relative CEO compensation may cause some NFP firms to drop out of the sample the following year due to significant funding reductions.Originality/valueThe study makes three noteworthy contributions to the literature. First, the study documents that the negative association between high relative CEO compensation levels and future donor and grantor contributions is much more widespread than previous literature suggested. Second, the authors document that high relative CEO compensation levels that trigger reductions in future contributions are significantly exacerbated by excess cash held by the NFP. Finally, the authors find that more sophisticated grantors are more sensitive to noncash CEO compensation levels as compared with donors.

Are Sustainable Companies More Likely to Default? Evidence from the Dynamics between Credit and ESG Ratings

We investigate the relationship between environmental, social and governance (ESG) performance and the probability of corporate credit default. By using a sample of 902 publicly-listed firms in the US from 2002 to 2017 and by converting Standard & Poor’s credit ratings into default probabilities from rating transition matrices, we find the probability of corporate credit default to be significantly lower for firms with high ESG performance. Furthermore, by expanding the time window in our regression analysis, we observe that the influence of ESG and its constituents strongly varies over time. We argue that these dynamics may be due to financial and regulatory shocks. In a sector decomposition, we additionally find that the energy sector is most influenced by ESG regarding the probability of corporate credit default. We expect an increasing availability of ESG data in the future to reduce possible survivorship bias and to enhance the comparison between ESG-rated and non-ESG-rated firms.

Uncovering Survivorship Bias in Longitudinal Mental Health Surveys During the COVID-19 Pandemic

AimsMarkedly elevated adverse mental health symptoms were widely observed early in the coronavirus disease 2019 (COVID-19) pandemic. Unlike the U.S., where cross-sectional data indicate anxiety and depression symptoms have remained elevated, such symptoms reportedly declined in the U.K., according to analysis of repeated measures from a largescale longitudinal study. However, nearly 40% of U.K. respondents (those who did not complete multiple follow-up surveys) were excluded from analysis, suggesting that survivorship bias might partially explain this discrepancy. We therefore sought to assess survivorship bias among participants in our longitudinal survey study as part of The COVID-19 Outbreak Public Evaluation (COPE) Initiative.MethodsSurvivorship bias was assessed 4,039 U.S. respondents who completed surveys including the assessment of mental health as part of The COPE Initiative in April 2020 and were invited to complete follow-up surveys. Participants completed validated screening instruments for symptoms of anxiety, depression, and insomnia. Survivorship bias was assessed for (1) demographic differences in follow-up survey participation, (2) differences in initial adverse mental health symptom prevalences adjusted for demographic factors, and (3) differences in follow-up survey participation based on mental health experiences adjusted for demographic factors.ResultsAdjusting for demographics, individuals who completed only one or two out of four surveys had higher prevalences of anxiety and depression symptoms in April 2020 (e.g., one-survey versus four-survey, anxiety symptoms, adjusted prevalence ratio [aPR]: 1.30, 95% confidence interval [CI]: 1.08-1.55, P=0.0045; depression symptoms, aPR: 1.43, 95% CI: 1.17-1.75, P=0.00052). Moreover, individuals who experienced incident anxiety or depression symptoms had higher odds of not completing follow-up surveys (adjusted odds ratio [aOR]: 1.68, 95% CI: 1.22-2.31, P=0.0015, aOR: 1.56, 95% CI: 1.15-2.12, P=0.0046, respectively).ConclusionsOur findings revealed significant survivorship bias among longitudinal survey respondents, indicating that restricting analytic samples to only respondents who provide repeated assessments in longitudinal survey studies could lead to overly optimistic interpretations of mental health trends over time. Cross-sectional or planned missing data designs may provide more accurate estimates of population-level adverse mental health symptom prevalences than longitudinal surveys.