University at Buffalo School of Management

Autumn 2024 Buffalo Business 21 The power of reflecting upon legacy Prompting people to consider how their lives will impact future genera- tions leads them to give more to charity and less to family members, according to new School of Management research. Published in Social Psychological and Personality Science, the study finds evidence for the "Andrew Carnegie Effect," a phenomenon named aer one of the wealthiest Americans in history, who donated more than 90% of his fortune to charity — about $65 billion in total. "Addressing socioeconomic issues like sustainability and intergenerational responsibil- ity requires collective solutions and longer time frames," says study co-author Daniela Goya- Tocchetto, assistant professor of organization and human resources. "That's why it's critical to find ways to motivate people to act on behalf of future generations, extending their goodwill beyond the borders of close relationships." The researchers conducted four studies in which nearly 3,700 participants were asked to consider their legacy via a simple reflection task. Legacy motives were measured through self-reported responses to items like "I want to have a lasting impact on future generations." Goya-Tocchetto says that while their findings show the Andrew Carnegie Effect has a small to medium impact on individual giving, it can make a big difference when magnified to the larger population. "As Carnegie famously stated, 'The man who dies rich, dies disgraced'," she says. "We all want to leave something behind to outlive ourselves, and by broadening our sense of sense of responsibility and beneficiaries beyond just our immediate families, we can support efforts that address broader, global issues." When newspapers close, nonprofit executive salaries go up — way up Local newspapers — key to keeping residents informed about civic affairs — keep nonprofit leader- ship salaries in check with the threat of negative press, according to new School of Management research. Published in the Journal of Accounting and Public Policy, the study found that when a newspaper goes out of business, total exec- utive compensation at local nonprofits goes up by more than $38,000 on average — an increase of nearly 32%. "Donors and volunteers expect their contributions to go to the execution of the nonprofits' mission, rather than leadership salaries, so unreasonably high compensation represents a serious problem," says study co-author Joshua Khavis, assistant professor of accounting and law. "Newspaper closures exacerbate problems, particularly when organizations lack internal governance and auditing." To analyze the relationship between local newspaper closures and nonprofit exec- utive compensation, the researchers ran a series of tests using financial information of nonprofits from 2008 to 2017 obtained from the IRS, as well as local newspaper closure data from previous research studies and from the University of North Carolina's Center for Innovation and Sustainability in Local Media. Their findings show that nonprofit executive spending increases the same year a local newspaper closes, and that persists over the next three years. They also observed a decline in residual cash and donations but did not find any changes in program spend- ing or long-term investments, suggesting that the increased compensation is not due to increased performance, but rather the loss of the monitoring newspaper. "We found declines in both endow- ments and donor contributions at nonprof- its aer a local paper closes," says Khavis. "This suggests that the executives' pay increases are funded by spending down endowments, and that donors react to the loss of external monitoring by withholding their donations." Khavis Goya-Tocchetto

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