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Sarbanes Boosts Costs For Many Tech Firms Paying More To Boards.(A)
Byline: MIKE ANGELL
Two years ago last week, Congress passed the Sarbanes-Oxley law in response to abuses found at Enron, WorldCom and numerous firms with smaller accounting scandals.
The law requires more independence for boards of directors. It asks for more accounting oversight and eliminates some executive perks.
For tech firms, Sarbanes-Oxley has meant higher costs and more hurdles. Companies must pay more money to board members. Startups have to be Sarbanes-ready before going public or getting funded. One unexpected consequence: Firms are delaying software purchases as they figure out the new rules.
"Sarbanes-Oxley has a lot of steps for companies to go through, lots of disclosures," said Nell Minow, chairman of board watchdog firm the Corporate Library.
Now board audit committees must have only nonemployee members. That requirement, along with increased workloads for boards, has fueled demand for board members.
So tech firms boosted board members' pay. For instance, Cisco's nine nonemployee directors saw retainer fees more than double, going from $32,000 to $75,000 starting in fiscal 2004. They get $2,000 for each meeting attended.
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