Director Compensation and Related Party Transactions

Related party transactions (RPTs) involve the transfer of resources, services, or obligations between a reporting company under the Securities Exchange Act and a related party (SFAS 57; IAS 24). Some of the highest profile accounting scandals, such as the ones at Enron and Adelphia, have involved RPTs. The Financial Accounting Standards Board (FASB) considers RPTs non-arm’s length transactions by their very nature and expresses concern about RPTs for potentially creating agency problems and hampering board monitoring efficacy, providing corporate insiders with the potential means to extract wealth from outside shareholders via self-dealing. Consistent with the FASB’s concern, the results from … Read more