Survey of corporate boards released this week by RHR International and Directorship reveals annual Sarbanes-Oxley compliance costs average $16 million--a jump of 77 percent from last year. Findings of the first annual Directorship/RHR International Board Survey also reveal that nearly half (47 percent) of companies surveyed do not have a CEO successor in place, although 61 percent expect that CEO leadership transition will go smoothly, according to the poll of almost 270 board directors at U.S. companies.

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 judgment 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."

Among other key findings:

• Ninety-four percent of board members are confident in the judgment of their fellow directors, though only 34 percent report a high level of dissent at board meetings
• Sixty-five percent of directors say they evaluate individual board members
• 30 percent of board members feel they always have adequate time to prepare for board meetings
• Thirty percent of board members meet four times per year without the CEO present
• Twenty-four percent report they never visit the company's constituencies

Dierickx and West offer the following tips for directors to improve the performance of their boards.

Seven Critical Actions for Board Effectiveness

1. Roll up your sleeves and master the performance drivers of the business.

2. Understand the business by reading management's reports and through personal experience.

3. Perform CEO evaluations frequently and systematically. Informal exchanges alone will not suffice.

4. Foster a culture of contrarian thinking and vigorous debate to permit meaningful support for decisions.

5. Be intolerant of cliques.

6. Know the unvarnished truth about the management team. Actively manage succession including selection, development and transition for the top team.

7. "Stress test" management's candor.

"The way board members manage their relationship with the CEO as well as the senior management team is indicative of the level of communication that takes place throughout an organization," underscores Dierickx.