Determinants of salary in nonprofit organizations: A study of executive compensation in symphony orchestras

This thesis presents the development of a demand equation for symphony orchestras and a three equation, simultaneous model examining factors which influence nonprofit executive compensation. Results from the demand equation demonstrate that nonprofit orchestras operate in the inelastic portion of the demand curve. Thus, ticket sales generate negative marginal revenues and attendance is increased at the expense of profit. If total revenue is less than total cost, the orchestra must be subsidized by contributions from private and public sectors. The compensation model indicates that salary is positively correlated with the ability to increase contributions and improve organizational quality. Therefore, administrators seeking to enhance income and marketability would do well to focus their energies on these two critical areas. Additionally, private contributions and quality respond positively to executive pay. Organizations seeking to enhance their reputation by increasing their level of service will bid up the salary of superior managers