Date of Conferral
Doctor of Business Administration (D.B.A.)
Terry D. Long
Nonprofit hospitals are under increased pressure to maintain financial stability and compliance with Internal Revenue Service (IRS) net community benefit requirements. Boards of directors are not always confident that the compensation packages awarded to executives stimulate them to act in the organization's best interest. The principal-agent theory formed the basis of this correlational study. Archival data from National Center for Charitable Statistics, Guidestar, and the Center for Medicare & Medicaid Services were collected from 117 nonprofit urban hospitals for the fiscal year 2013. Regression analysis was used to determine the significance of relationships between return on assets (ROA), change in net assets (profit), and net community benefits expense and average executive compensation (AEC). ROA and profit demonstrated a significant relationship with AEC. The direction of the relationship between profit and AEC was positive while the relationship with ROA and AEC was negative. There was no significant relationship between net community benefit and AEC. The implications for positive social change include improved understand of executive compensation alignment, job creation, and IRS net community benefits expense requirements. Lawmakers may use the information to create legislation related to net community benefits expense requirements.