Common Agency Theory, Corporate Governance, and Not-For-Profit Organizations

The paper contributes to the theoretical understanding of how corporate governance affects organizational processes and outcomes in not-for-profit organizations. Specifically, the separation between organization’s stakeholders (principals) and the board of directors (common agent) in not-for-profit organizations based on voluntary resources is examined. According to the common agency framework, multiple principals’ cooperation impacts organizational outcomes of not-for-profit organizations. The contribution claims that cooperation is not only a good proposition held by the variety of actors relevant to corporate governance of non-for-profit organizations, but it also determines the wealth maximization of organization’s stakeholders. Theoretical results are driven by the case study of the largest humanitarian organization’ corporate governance: the International Federation of Red Cross and Red Crescent Societies (IFRC). The study provides also some propositions to further researches, addressed to study the elements of corporate governance exchange relationship with a special focus on process and outcomes of not-for-profit organizations.