Harvard Professor: Less competition between nonprofits ==> Less efficient output
Date: Monday April 29 2002, @09:36AM
Topic: ICANN Staff and Structure
BenEdelman writes "I recently stumbled onto
"The Governance of Not-for-Profit Firms,
a draft article by Professor Ed Glaeser of the Harvard University Department of Economics. This is a fascinating piece
in its own right -- continuing Glaeser's prolific work.
(I especially recomment the entertaining and insightful "Not-For-Profit Entrepreneurs" which
"derive[s] conditions under which completely self-interested entrepreneurs opt for not-for-profit status"). But since it so clearly
relates to topics considered by current ICANN restructuring efforts, I thought folks here might find it helpful.
Glaeser's abstract follows:"
Many factors including incentive-pay, powerful shareholders, and takeover threats
push for-profits managers towards maximizing shareholder value. One of the
most striking factors about non-profit firms is that they have no comparable
governance institutions, and the only check on managers are boards that are
themselves rarely responsible to anyone outside the firm. This essay discusses the
implications of these weak governance institutions on non-profit behavior. A
primary implication is that non-profits will often evolve into organizations that
resemble workers’ cooperatives. The primary check on this tendency is the need
of the organizations to compete in outside markets. After presenting a model of
non-profit behavior, I look at four different sectors (hospitals, museums,
universities and the church). All display significant signs of capture by elite
workers, but all still perform their basic missions reasonably, probably because of
Applying this reasoning to ICANN: The greater the extent to which ICANN lacks
competition from similar institutions, the lesser the incentive for ICANN to produce
efficiently or effectively. Sounds obvious, on some level, but Glaeser's rigorous derivation
and theoretical support may be of interest to some.
Disclaimer: I took a class
from Glaeser, wrote a paper for him, and think he's a great guy. (But I
don't have any ongoing relationship with him.)
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