Board composition and accountability of non-profit organizations

Abstract

Non-profit organizations (NPOs) are generally subjected to less stringent regulatory requirements than for-profit organizations. As such, NPOs are generally reluctant to share more comprehensive information with the various stakeholders and may not recognize the need for accountability. The purpose of this study is to examine the influence of board composition on the level of accountability for NPOs in Malaysia. Board composition and the level of accountability are obtained from the content analysis of annual reports of 234 societies registered with Registrar of Societies in Malaysia for the financial period 2010. The level of accountability (ADI) examined is based on two main components, transparency and compliance while board composition examined in this study consists of board size, board professionalism and board members with political connections. Results of this study provide evidence that the overall level of accountability is low. This infers that more comprehensive regulatory requirements or at the very least, the existence of best practices with regards to accountability can be a useful mechanism in enhancing the accountability of NPOs. In addition, the results also highlight that an optimum mix of board members matters in ensuring efficient resource strategy and consequently enhance the level of accountability in NPOs. Overall, the findings in this study provide useful information to regulators in their continuous efforts to improve accountability in the non-profit sector. This in turn can enhance the credibility and sustainability of the NPOs. © by author(s).