For-profit and nonprofit organizations exist for different reasons: for-profits to generate a return on investment for shareholders, and nonprofits to pursue charitable and social activities unrelated to commerce. The obligations of the boards of directors of both entities, however, are the same: to oversee the organization and to hire, advise, evaluate, and, when necessary, remove the CEO. We examine the attributes and processes of both for-profit and nonprofit boards, and identify opportunities to learn from one another. We ask: Why is there not greater sharing of practices between the two entities? Why are both unsuccessful at developing reliable nonfinancial metrics to measure organizational progress? Why are for-profit CEOs paid so much more for their services? Do they create commensurately more value?
Copyright held by Nicholas E. Donatiello, David F. Larcker, and Brian Tayan. Further inquiries about reproduction and use should be directed to the Corporate Governance Research Initiative.
