Agency conflicts between board and manager

Detecting agency problems is an important task when assessing the effectiveness of a nonprofit organization’s governance. A first step is to examine the objectives of principals and agents and determine whether there is a systematic difference between them. Using a discrete choice experiment, we identify the objectives of board chairpersons (principals) and headmasters (agents) of Flemish nonprofit schools. We find systematic differences between the two groups. Of the seven possible objectives set out in the experiment, six are relevant for both headmasters and board chairpersons. For four of these, the preferences of both groups differ significantly. Whereas ideological values play an important role for both the board and the headmaster, they are significantly more important for the board. Both parties dislike having a large number of pupils, and the disutility is larger for the board. With respect to job satisfaction and pupil satisfaction, we find the opposite: while the board is prepared to give up pupil and job satisfaction in favor of the other objectives, these two objectives score very high on the priority list of the headmasters.