Nonprofit organizations that pay their executives too much could be taking a bite out of their own bottom line, research shows.
The study by Rutgers University assistant professor Erica Harris revealed that nonprofit organizations with highly paid executives see a decline in charitable contributions from donors.
"Across the board, we've found that donations go down when CEOs are paid more," said Harris, who is performing the research with Steven Balsam, an accounting professor at Temple University.
The study found that executives who were paid in the top 10 percent of the study's sample of nonprofit organizations saw donations decline by 15 percent.
Despite nonprofit executive pay being public information, the research indicates it isn't until the salaries are published in the media that the donations begin to drop.
Harris and Balsam reached their conclusions after reading more than 900 articles on nonprofit organizations. Out of those published reports, more than 400 organizations had at least one article written about executive compensation.
"We look at news articles in one year and then observe donations in the following year," Harris said. "When donors catch wind of high executive compensation, regardless of size and industry, they withhold their donations or perhaps they donate to a different organization in the same industry."
The study found that some of the highest paid nonprofit executives are the leaders of large organizations like hospitals and universities.