The relevant pages are 3 and 6 of the FAQ version dated August 24, 2005.
Page 3 talks about calculating ECL and how it affects ONLY starting gold and experienced earned as you progress.
Page 6 talks about the ECL of a Cohort being what you should use to decide what is and is not an appropriate Cohort.
ECL = Racial Hit Dice + Class Levels + Level Adjustment
The LA part is the penalty; it is the "trade off" for a creature race or template getting "more special abilities than normal".
Generally, as a rule of thumb, you apply ECL as a penalty for most cases (the starting equipment being the exception). You DO count it so the character earns less XP from an encounter. You DO NOT count it when qualifying for Prestige Classes, determining Maximum Skill Ranks, and so on.
That being said, the Rules as Written come out as Jack Smith said: Leadership score 14, Maximum Cohort Level 7.
Of course, you are free to make whatever changes you like in your own game.