Those powerful words were spoken by New York Governor Andrew M. Cuomo just over two years ago in his announcement of the formation of a task force to combat excessive executive compensation at not-for-profit corporations that provide services to the poor. The creation of the task force marked the beginning of major efforts that would culminate in new regulations governing executive compensation of certain New York not-for-profit health care corporations, and a proposed law applicable to the compensation paid to executives of all New York not-for-profit corporations.

The compensation paid to executives of tax-exempt organizations has been the subject of much recent attention, and has received much criticism, especially in New York. Excessive executive compensation can result in public relations disasters. It also can trigger significant legal ramifications for organizations that are out of compliance with applicable statutory and regulatory requirements, both at the federal and the state level. In this article, we discuss the relevant authorities, and focus on regulations issued by the Department of Health for not-for-profits in the health industry. We then suggest a series of “best practices” for not-for-profit corporations—both in the health industry and other sectors—as they make compensation determinations for their executives.

Originally published in the New York Law Journal on November 22, 2013.