Study finds small firms hit especially hard

A new University of Georgia study finds that the landmark Sarbanes-Oxley Act of 2002 and related rule changes of the major stock exchanges have dramatically altered the makeup of corporate boards, making them larger and more independent. The legislation also had the unintended effect of increasing director pay by more than 50 percent.

“Post Sarbanes-Oxley, the demand for directors by firms is up and the supply is down because the job is harder,” said study co-author Jeff Netter, a finance professor and chair holder in UGA’s Terry College of Business. “So what do you find” Pay is up – pay is way up.”

The Sarbanes-Oxley Act (SOX) was passed with near unanimous Congressional approval following the corporate scandals that brought down companies such as Enron and WorldCom. Among other things, the act and changes imposed by the New York Stock Exchange and Nasdaq sought to enhance corporate governance by promoting board independence and imposing greater responsibility and accountability on board members.

[1] EurekAlert: UGA study finds surge in director pay following landmark Sarbanes-Oxley Act of 2002