Sarbanes-Oxley might have made boards larger and more independent but it's also made them more expensive.

A University of Georgia study, which drew on data of more than 8000 firms of various sizes between 1989 and 2005, found that the legislation had the effect of increasing director pay by more than 50 per cent.

The study, The Effects and Unintended Consequences of the Sarbanes-Oxley Act, and its Era, on the Supply and Demand for Directors found that median pay per director rose by more than $33,000 from 2001 to 2004, an increase of almost 56 per cent. Not surprisingly, the higher costs of director pay were disproportionately borne by small companies. Small firms paid $3.19 in director fees per $1,000 of net sales in 2004, which was $.81 more than they paid in 2001. Large firms, on the other hand, paid $.32 in director fees per $1,000 of net sales, seven cents more than they paid in 2001.

One of the big drivers in the pay rises was the increase in director workload. The research revealed that audit committees met roughly twice as often after the law was implemented. For small firms, it went from an average of 2.6 meetings per year in 2001 to 5.1 meetings per year in 2004. For the big ones, it went from an average of 4.5 times per year in 2001 to 8.2 times in 2004.

Director and Officer (D&O) insurance premiums more than doubled. Also the composition of the boards has changed post-SOX with more lawyers/consultants and financial experts.

The researchers say their findings raise some important questions: "What are the value implications of this change and the effects on
performance? Have the mandates of SOX increased director workload and changed board structure so
materially that boards are less effective in serving an advisory role? We also document that director
compensation increased substantially post SOX. What are the implications for that on firm performance?
Pay for monitoring has never been a mantra of good governance. How has SOX impacted firms' abilities
to deal with changes in the corporate environment? What types of firms are most affected?"

The answers will tell us a lot about the effectiveness of Sarbanes-Oxley.

But what's already clear is that the law of unintended consequences has kicked in.