Majority of Board Directors Feel Sarbanes-Oxley Regulations Should be Repealed or Overhauled
- Significant Numbers Demand Amendments, According to Korn/Ferry International’s 32nd Annual Board of Directors Study -
New York, February 23, 2006 – Just four years after the enactment of Sarbanes-Oxley, 58% of Board Directors surveyed feel that the regulations have served only to make boards overly cautious, and should be repealed or overhauled, according to the 32nd Annual Board of Directors Study, released today by Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions.
“Although gross corporate misconduct has necessitated recent landmark regulations, there is a growing contention that the impact of these rules has been negative,” says Charles King, head of Korn/Ferry International’s Global Board Services Practice. “Many directors believe boards have become exceedingly wary and are not taking necessary risks to drive company growth. These directors are demanding reform. ”
The most comprehensive, longest-running survey of its kind in the world, the Board of Directors Study examines opinions and practices found in boardrooms of major corporations throughout the world. The findings are based on the responses of nearly 1,200 board members from 15 nations in the Americas, Asia Pacific and Europe.
Highlights of this year’s study include:
• Effects of Regulation. Rather than being the catalyst for improved governance, 72 percent of responding directors in the Americas believe that Sarbanes-Oxley regulations have served to make their boards more cautious. Almost two-thirds (65 percent) of their peers serving on US-listed Japanese boards hold the same opinion. Sixty-one percent of responding directors in the UK view the Combined Code as having this same effect on governance.
More than half (58 percent) of responding directors in the Americas feel SOX should be repealed or overhauled. This is a view shared by 37 percent of surveyed directors in Japan. Twenty-eight percent of responding directors in the UK endorse such action to remedy the Combined Code.
• Director Risk. Perceived risk has made directors worldwide more discriminating when accepting directorship invitations. Fifty-nine percent of directors surveyed in the Americas have declined a board seat due to the risk associated. Risk was also characterized as the determining factor in turning down board seats by 83 percent of surveyed directors in Australasia, 77 percent in Switzerland and 68 percent in Non-Japan Asia.
• Board Service. Board service commands a significant time commitment, according to respondents around the world. The majority (62 percent) of responding directors in the Americas report they devote 16 to 20 hours each month to board matters. Sixteen percent of directors in the Americas report they devote more than 25 hours a month as do about one quarter (26 percent) of their peers surveyed in Europe and 21 percent of surveyed in Asia Pacific.
• Director Compensation. An average annual retainer and per meeting fee of $76,707 was awarded to directors from FORTUNE 1000 companies this year. This is a 35 percent increase over that awarded in 2004. For the first time, cash compensation broke the six-figure mark: directors of $20+ billion organizations received an average of $115, 375, surging 43 percent from that paid the previous year. (Equity compensation is not included in these figures.)
Methodology Korn/Ferry International retained a leading marketing research firm for survey preparation and data analysis, providing continuity of methodology for this global study. Board members in the Americas, Asia Pacific and Europe were invited to participate. More than 1,200 directors from 15 countries returned a completed questionnaire.
About Korn/Ferry International Korn/Ferry International (NYSE:KFY), with 70 offices in 35 countries, is the premier provider of executive search, outsourced recruiting and leadership development solutions. Based in Los Angeles, the firm partners with clients worldwide to deliver unparalleled senior-level search, management assessment, coaching and development, and middle management recruitment services through its Futurestep subsidiary.
