CEO tenure and performance in the nonprofit sector

Nonprofit firm performance is critical to the sector that provides products and services to some of the most underserved communities. Understanding the link between the board of directors and CEO tenure and how this interplay is associated with performance is important to both practitioners and researchers alike, as this sector remains one of the least regulated in the United States even though both the scope and impact are great, and the sector continues to experience exponential growth. This paper reports on the impact of tenure on firm performance and how the role of the board of directors influences this link. The conclusion is that at different points in their tenure, CEOs have a unique set of priorities. The results indicate that a CEO in early tenure at nonprofit organizations still tends to focus on net profit ratios, while those that were longer termed tended to focus on more mission-oriented objectives. Consequently, tenure was positive and significant on net profit ratios when comparing short and medium tenure, however, it was both negative and not significant for the same short and medium tenure when testing for program expense ratios. Additionally, the board size, also returned interesting results, where larger boards had a negative and significant impact on both net profit and program expense ratios, indicating that the board of directors had difficulty monitoring performance outcomes regardless of the length of CEO tenure.