New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 Savings Banks and Savings and Loan Associations › Section 4.2 - Savings bank not permitted to remove trustee automatically upon his separation from his position as an officer

Current through Register Vol. 46, No. 28, July 10, 2024
A savings bank was advised that a proposed by-law providing
				  for automatic removal of a trustee who is also an officer, upon separation of
				  the trustee from the office he holds, would be inconsistent with section 248,
				  and, therefore invalid.
In limine,
the department noted that section
				  248(2) sets forth the instances when it is mandatory that the office of a
				  trustee becomes vacant; that section 248(1) sets forth the circumstances under
				  which a trustee may be removed at the discretion of the other trustees; and
				  that there is no provision in either of those subdivisions or any other part of
				  the Banking Law for removal of a trustee who is also an officer, upon his
				  separation from such office. The department reasoned that discretionary removal
				  by the board of trustees is limited to the conditions described in subdivision
				  1 of section 248. The department observed that besides providing the
				  substantive grounds for discretionary removal, the subdivision also set forth
				  procedural requirements which must be satisfied. The department rejected the
				  idea that these procedural safeguards could apply to situations other than
				  those set forth in the subdivision, and did not believe that it would make
				  sense to apply less stringent standards to non-statutorily prescribed grounds
				  for removal. Under the circumstances, it was clear to the department that the
				  Legislature did not contemplate discretionary removal of trustees for other
				  than the statutorily prescribed grounds.
Considering that officers are appointed or elected by the
				  board of trustees and may be removed, with or without cause, by the trustees,
				  the department concluded that a trustee who is an officer would not be able to
				  function as a trustee with total independence from the influence of the other
				  members of the board, so long as he must act with the knowledge that his
				  colleagues on the board might remove him as trustee by terminating his
				  employment as an officer of the savings bank.
The department emphasized that its policy is to prevent a
				  situation where certain members of a board may exercise undue or excessive
				  influence upon other members of the board. Just as the influence of
				  officer-trustees is restrained by the limitation of their number on the board,
				  so too should the influence which other members of the board might exercise
				  upon an officer-trustee be restrained.
Lastly, it was recognized that certain officers may be
				  elected to the board of trustees so that their special knowledge will be
				  readily available to the board and that when such officer-trustees no longer
				  serve as officers their value to the board would, understandably, be
				  diminished. Nevertheless, the department concluded that the potential danger of
				  the proposed by-law required its prohibition.
DATED: September 3, 1968