A recent survey of corporate boards by RHR International reveals annual Sarbanes-Oxley compliance costs average $16 million--a jump of 77 percent from last year.
Sarbanes-Oxley requirements have caused companies such as GE to spend a reported $30 million on internal control requirements alone. Last May, AIG chairman and CEO Maurice "Hank" Greenberg indicated that the world's largest insurer was spending $300 million a year fulfilling the new requirements.
Of the 266 board directors surveyed, almost two-thirds (64 percent) reported that the new regulations have changed their participation as a director. One major change is highlighted in the compensation of the company CEO. Nearly two-thirds (63 percent) of the directors indicated plans to change either the CEO salary or salary relative to bonus.
"It's clear that not all board directors are fully engaged," says J.P. Donlon, Editor-in-Chief of Directorship. "For example, almost one-fourth do not visit with employees, customers or suppliers, which means their only source of information is what management tells them."
Survey results also suggest that most directors express a high degree of confidence in the judgement of their fellow directors, but only a third say the level of dissent at board meetings is high.
"The capacity of a board to not only tolerate dissent, but make it an expected and productive part of the culture of the board is important. In the absence of an open and candid culture, some individuals will have undue influence by default," said Constance Dierickx, board services practice leader, RHR International.
Ninety-five percent of directors report they are "mostly" or "absolutely" confident in the current CEO, and an almost equal percentage (90 percent) note that they provide frequent, candid CEO feedback. While Karen West, Consultant, RHR International views the strong level of confidence among board members in their CEOs as "encouraging," she warns that, "without a succession plan, companies risk losing much of the momentum and results that today's CEOs are building."
RHR International is a world leader in executive and organizational development, particularly helping companies develop and align talent with strategy.
CMSWire is a popular web magazine published by Simpler Media Group. We provide news, advice and analysis for professionals driving digital customer experience strategy, evolving the digital workplace and creating intelligent information management practices. The CMSWire team produces 500+ authoritative articles per quarter for a community of over 750,000 market influencers.