Walking the Regulatory Line: The Effects of a Disbursement Quota on Foundations

Nathan J. Grasse
Professor
Master of Philanthropy & Nonprofit Leadership Program
Carleton University

Elizabeth A.M. Searing, PhD, CNP
Fellow, Venise Stuart Professorship in Nonprofit Management and Leadership
Associate Professor, University of Texas at Dallas
Adjunct Research Professor, Carleton University

Foundations exist to support charitable causes over an extended period, allowing investment returns to improve social conditions. In many countries, this is regulated by a required payout percentage each year. The existing research, overwhelmingly from the United States, has examined foundations’ regulatory compliance under the static conditions of the longstanding rule of distribution of 5% of assets annually. Drawing on regulatory behavior theory, this research takes advantage of the rare opportunity presented by a decrease in the disbursement rate in Canada to determine whether foundations altered their behavior and to assess the factors associated with differential responses. This facilitates our understanding of whether a mandated disbursement quota functions as a floor, a norm, or is irrelevant in guiding payouts, which will assist practitioners and policymakers in assessing the policy relevance for foundation compliance or over-compliance.

Nathan J. Grasse is a Professor in the Master of Philanthropy and Nonprofit Leadership (MPNL) program at Carleton University. He is an associate editor at the Journal of Civil Society, a member of the editorial board of Public Administration Review, and a board member of the Nonprofit Academic Centers Council, and has published in journals such as Nonprofit and Voluntary Sector Quarterly, Nonprofit Management and Leadership, the Journal of Public Administration Research and Theory, Policy Studies Journal, and the Review of Public Personnel Administration. His academic focus primarily revolves around the governance and financial management of public-serving organizations.

Dr. Elizabeth A. M. Searing is an Associate Professor of Public and Nonprofit Management at the University of Texas at Dallas and the Fellow to the Venise Stuart Professor in Nonprofit Management and Leadership. Dr. Searing’s primary research focus is the financial management of nonprofit and social enterprise organizations, but she also conducts work on comparative social economy more broadly. She is an Associate Editor and editorial board member of Nonprofit Management & Leadership, and an editorial advisory board member at VOLUNTAS and the Journal of Public Budgeting, Accounting and Financial Management (JPBAFM). Her articles have been published in peer-reviewed journals such as the Journal of Economic Behavior and Organization, Nonprofit Management & Leadership, and Nonprofit and Voluntary Sector Quarterly.