Update to ECFA Policy on Compensation-Setting and Related-Party Transactions

August 9, 2017

The heart of ECFA Standard 6 is to help member organizations uphold the highest standards of integrity in the critical areas of compensation-setting and related-party transactions.

To that end, the ECFA Board of Directors adopted the Policy for Excellence in Compensation-Setting and Related-Party Transactions, which became effective January 1, 2014. The Policy requires members to exercise a high level of due diligence in approving compensation of the organization’s top leader and engaging in related-party transactions. This includes for both areas excluding those with a conflict of interest from participating in the decision-making process, relying upon appropriate third-party comparability data, and documentation of the organization’s process, among other requirements.      

The ECFA Board has approved a modification to the Policy, now offering the governing boards of ECFA members the option of delegating approval of these transactions to a committee approved by the board if the committee is comprised of totally independent members and otherwise meets the requirements of ECFA standards. The Policy was modified in part to more closely conform to the “rebuttable presumption of reasonableness” safe harbor described in federal tax regulations and continues to represent a standard that exceeds the requirements of federal tax law.

Click here to view the Policy and full commentary to ECFA Standard 6. For any questions or assistance concerning this update, please email Info@ECFA.org.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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