SH&P Client Alert: NY Proposes Limits on Non-Profit Exec Comp

SH&P Client Alert: NY Proposes Limits on Non-Profit Exec Comp

June 1 2012

Much like the recent focus on compensation paid to executives at public companies, increasingly, press reports focus on and critique all facets of executive pay at non-profit organizations.  Public outcry and donor sentiment have also led some regulators, including the State of New York, to attempt to curb executive compensation levels at non-profits.  On Wednesday May 16th New York State Governor Cuomo, in cooperation with 13 state agencies, announced proposed regulations to limit executive compensation at certain non-profits that receive NY State support. These regulations are scheduled to take effect on January 1, 2013 and were designed to implement Governor Cuomo’s January 2012 Executive Order, which stated generally that non-profits receiving state funding would need to cap compensation paid to any executive at $199,000 per year.

The proposed regulations do not go as far as some feared the Governor’s January Executive Order may have been suggesting.  Instead of imposing an absolute cap on compensation to non-profit executives receiving state funding, the regulations prohibit the use of State funds to pay any amount of compensation in excess of $199,000 to an executive.  However, as described in greater detail below, even if a non-profit uses alternative funding sources to pay an executive more than $199,000, the non-profit will be subject to additional restrictions and possible penalties.

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