CCEG Research Agenda

Impact of Sarbanes-Oxley on the Director Labor Market

Project Leader: Eric Helland

Anecdotal evidence suggests that Sarbanes-Oxley has decreased the willingness of directors to serve on boards and thus increased the cost to shareholders of retaining directors. If true, the unintended consequence may be lowering the quality of governance if firms are settling for lower-quality directors. This study examines the impact of Sarbanes-Oxley on the labor market for directors by estimating changes in liability risk, workload, and compensation. The second phase of this research will consider other emerging trends in the labor market, such as increasing differentiation among Director pay and the possibility of linking of pay of Directors and CEOs to their relative responsibility.