What's happening
This bill requires not-for-profit corporations to restrict employees and relatives from serving on governing boards or hiring family, with certain exceptions.
Why it matters
Strengthens board independence. by requiring not-for-profits to ensure a certain percentage of their governing board is independent from the organization, which could help prevent conflicts of interest and improve accountability.
Restricts insider hiring and nepotism. by prohibiting the employment of relatives of the chief executive or board members unless two-thirds of the board approves, aiming to reduce favoritism and increase trust in nonprofit governance.
Mandates greater transparency. by requiring that governing documents addressing employee-board relationships, family hiring, and conflicts of interest be available for review by the Attorney General, potentially increasing oversight and public confidence.
Imposes clear boundaries for employees. by barring employees from serving as voting board members or chair, except for certain cemetery corporations, which could reinforce the separation between management and oversight roles within nonprofits.
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Who cares
Not-for-profit employees and governing boards
The bill would bar employees from serving as board chairs or voting board members and require bylaws addressing board independence, family hiring and business conflicts of interest.
Chief executives, board members and their relatives
Employing anyone related by blood or marriage to a chief executive or board member would require approval from two-thirds of the governing body's members.
New York attorney general
The bill would require the bylaws covered by the section to be available for review upon request.
Cemetery corporations subject to Article 15
These corporations would be exempt from the new bylaw-content requirements, employee board-service restrictions and family-employment approval requirement.
Headline styles
Bar Nonprofit Employees on Boards
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to corporations, authorities and commissions
- Referred to corporations, authorities and commissions
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
6221
2017-2018 Regular Sessions
IN SENATE
May 11, 2017
Introduced by Sen. MARCELLINO -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions
AN ACT to amend the not-for-profit corporation law, in relation to prohibiting certain employees of a not-for-profit corporation from serving on the corporation's governing board or from hiring family members
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 602 of the not-for-profit corporation law is amended by adding five new paragraphs (g), (h), (i), (j) and (k) to read as follows:
(g) The by-laws of a not-for-profit corporation shall contain a provision on:
(1) employees serving on such governing body and the percentage of the membership of the governing body that must be independent of the organization;
(2) hiring of family members of employees and governing body members; and
(3) conflict of interest covering business interests.
(h) All by-laws required in this section shall be available for review by the attorney general upon request.
(i) Employees of a not-for-profit corporation are prohibited from serving as the chair of such organization's governing body and from serving as a voting member of such organization's governing body.
(j) No person who is related to the chief executive or any member of a governing body by blood or marriage shall be employed by such organization, except with the approval of two-thirds of the members of the governing body.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD11689-01-7
S. 6221 2
(k) Notwithstanding any provision to the contrary, the provisions of paragraphs (g), (i) and (j) of this section shall not apply to cemetery corporations that must comply with article fifteen of this chapter.
§ 2. This act shall take effect one year after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the not-for-profit corporation law, in relation to prohibiting certain employees of a not-for-profit corporation from serving on the corporation's governing board or from hiring family members
Purpose
This legislation requires not-profit-corporations to have in their by-laws policies regarding employees involvement on governing boards, the hiring of family members of both employees and governing board members, and the handling of issues arising from conflicts of business interests. It also provides oversight of these by-laws by the State Attorney General.
Summary of provisions
Section 1. Amends Section 602 of the not-for profit corporation law by adding five new paragraphs as follows:
(g) Requires by-laws of a not-for-profit corporation to contain a policy on:
1. Employees serving on a governing body and the percentage of the membership of the governing body that must be independent of the organization
2. Hiring of family members of employees and governing body members
3. Conflict of interest covering business interests
(h) Requires all by-laws in this section to be available for review by the Attorney General upon request
(i) Prohibits employees of the not-for-profit corporation from:
1. Serving as Chair of the organization's governing board
2. Serving as a voting member of the organization's governing board
(j) Prohibits any person related to any executive or member of a governing body by blood or marriage to be employed by the organization except with approval of two-thirds of the members of the governing body.
(k) These provisions do not apply to cemetery corporations formed under Article 15
Section 2. Effective date one year after it shall have become law.
Justification
This legislation is intended to close current loopholes in State law and provide a streamlined and fair system across the board for all not-for-profit corporations in New York State while also providing safeguards that can be reviewed by the Attorney General. This legislation will provide for more oversight of these boards and their actions to ensure that taxpayers funds are not misappropriated and boards are operating properly and legally.
Legislative history
2015-16: S.5310 Corporations, Authorities, and Commissions/ No Same As 2013-14: S.5315-B Rules/ No Same As
Fiscal implications
None to State.
Effective date
This act shall take effect one year after it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.