Do ‘Good Governance’ Codes Enhance Financial Accountability? Evidence from Managerial Pay in Dutch Charities

Abstract

This paper examines the initial impact of a ‘good governance’ code for charitable organisations that was promulgated in the Netherlands in 2005. Data are gathered from publicly available annual reports of 138 charities in the post‐implementation phase of the code (2005–2008). We first examine whether the code altered charities’ governance structures. Next, we investigate managerial pay as a key aspect of discharging financial accountability because prior literature focused on ‘excessive’ compensation. The findings indicate that a strengthened governance structure positively affects the likelihood of disclosing information concerning managerial pay, as well as mitigating managerial pay level.

Understanding self‐regulation for political control and policymaking: Effects of governance mechanisms on accountability

“…The analysis of EDP as a proxy for accountability enables direct traceability to recommendations in self‐regulation and identification of causal effects. Several studies consider EDP as an adequate and relevant measure of accountability (Clarkson, van Bueren, & Walker, 2006; Perego & Verbeeten, 2015; Riaz, Ray, & Ray, 2015).…”

“…Thus, explicit recommendations can also lead to the behavior‐controlling effect of the agent and reduce critical information asymmetries for SOEs. Empirical studies on the effects of self‐regulation in private and non‐profit sectors report that organizations affected by (newly) implemented non‐mandatory governance mechanisms and disclosure regulations significantly modified their governance structures and improved the extent of the disclosure (Nowland, 2008; Perego & Verbeeten, 2015). This reasoning leads to the following hypothesis:Hypothesis EDs are more likely to disclose EDP if they are subject to self‐regulation .…”

“…Several studies in leading journals deal with self‐regulation, focusing on its effects for the context of private, mainly listed, firms (Mensi‐Klarbach, Leixnering, & Schiffinger, 2019; Riaz, 2016) and non‐profit organizations (Perego & Verbeeten, 2015) providing mixed results (Aragon‐Correa, Marcus, & Vogel, 2019). These studies examine the effects of self‐regulation on firms' disclosure (Nowland, 2008; Perego & Verbeeten, 2015; Point & Tyson, 2007; Riaz, 2016), firms' compliance and market reactions (Hooghiemstra & van Ees, 2011), and firms' strategies and performance (Aragon‐Correa et al, 2019). However, no empirical study has analyzed the effects of self‐regulation in the special public sphere of SOEs.…”

Generación De Rendimientos Financieros Positivos, Dada La Divulgación De Los Contenidos De Los Códigos De Buen Gobierno en Las Organizaciones Cotizadas en Colombia

“…Los códigos de buen gobierno pueden presentar una estructura de gobierno organizacional fortalecido, que puede afectar positivamente la probabilidad de generar mejores procesos de divulgación de información (Perego & Verbeeten, 2015). Sin embargo, para el caso de Colombia, a pesar de las mejoras que se han realizado en asuntos de divulgación en los contenidos de los códigos de buen gobierno, las organizaciones no logran los resultados deseados, ya que tienen un enfoque financiero que se aleja de los demás factores de contenido (Romero, Wanumen, & Católico, 2014).…”

The economics of nonprofit organisations' governance

“…Harris, Petrovits, and Yetman (), implicitly, assess the relationship between c (governance intensity) and b (reduction of asset diversion), as do Perego and Verbeeten () (increased good governance measures vs. lower managerial remuneration).…”