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Policy Sci (2009) 42:243273 DOI 10.1007/s11077-009-9085-3
Mary Kay Gugerty
Published online: 31 May 2009 Springer Science+Business Media, LLC. 2009
Abstract This article examines the structure of nonprot voluntary accountability and standard-setting programs, arguing that these programs can be understood as collective action institutions designed to address information asymmetries between nonprots and their stakeholders. Club theory and the economics of certication suggest that such programs have the potential to provide a signal of quality by setting high standards and fees and rigorously verifying compliance. Such mechanisms can signal quality because higher participation costs may allow only high-quality organizations to join. The article examines the implications of signaling theory using an original dataset on the structure of 32 nonprot accountability programs across the globe. While many programs set high standards for compliance, the key distinction between strong and weak programs is the use of disclosure or verication mechanisms to enforce compliance. Contrary to theoretical expectations, compliance standards and verication do not appear to be substitutes in creating stronger voluntary programs.
Keywords Nonprot accountability Collective action Voluntary programs
Voluntary clubs Self-regulation Certication
Introduction
Voluntary accountability and standard-setting programs among nonprot organizations are on the rise (Lloyd 2005; Lloyd and de las Casas 2005; Sidel 2003; Bothwell 2001). These programs consist of codes of conduct, certication programs, and other standard-setting mechanisms designed to provide information on nonprot quality to external stakeholders. Given that nonprots are supposed to be trusted agents of the public good and are prohibited from distributing prots to owners, why would such agencies seek to create and join costly voluntary programs that potentially constrain their exibility and operations? This article argues that voluntary programs among nonprots arise in part as a response to
M. K. Gugerty (&)
Evans School of Public Affairs, University of Washington, Box 353055, Seattle, WA 98195, USA e-mail: [email protected]
Signaling virtue: voluntary accountability programs among nonprot organizations
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imperfections in the market for nonprot accountability. These imperfections consist of information asymmetries between nonprots and their stakeholders. Since nonprot stakeholders, including donors, governments, and citizens, cannot easily observe how organizations use their funds, they face a dilemma. If they cannot trust nonprots to perform as promised, then they may require some credible signal of their virtue.
The data...