Trust But Verify Voluntary Regulation Programs In The Nonprofit Sector

Download or read book Trust But Verify? Voluntary Regulation Programs in the Nonprofit Sector written by Aseem Prakash and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how information problems can cause agency slippages and lead to governance failures in nonprofits. Drawing on the principal-agent literature, we provide a theoretical account of an institutional mechanism, namely voluntary regulation programs, to mitigate such slippages. These programs seek to impose obligations on their participants regarding internal governance and use of resources. By joining these programs, nonprofits seek to differentiate themselves from nonparticipants and signal to their principals that they are deploying resources as per the organizational mandate. If principals are assured that agency slippages are lower in program participants, they may be more likely to provide participants with resources to deliver goods and services to their target populations. However, nonprofit regulatory programs are of variable quality and, in some cases, could be designed to obscure rather than reveal information. We outline an analytic framework to ex ante differentiate the credible clubs from the “charity washes.” A focus on the institutional architecture of these programs can help predicting their efficacy in reducing agency problems.