Sarbanes-Oxley and Director Pay

A new study by academics at the University of Georgia and Clemson University finds that director pay has increased post-SOX. In addition, companies pay more for D&O premiums now compared to before the legislation.

But, and this is no surprise to many of us, companies are now also getting more bang for their buck from their board of directors:
* Post-SOX boards are larger and more independent
* Director workload and risk increased: audit committees meet more than twice as often post SOX as they did pre SOX
* The corporate director pool also changed post SOX: more post-SOX directors are lawyers/consultants, financial experts and retired executives and fewer are current executives.

Well, its great that directors have more financial expertise, because this older study from 2004 found that the probability of restatement is lower in companies that have independent directors with financial expertise on their boards. In the authors' words, "Our findings are consistent with the idea that independent directors with financial expertise are valuable in providing oversight of a firm's financial reporting practices."

That's not the last word on board composition and firm performance, though. Watch this space for a neat summary of studies on board composition and various aspects of corporate performance.