Interlocking directorates -- defined as the linkages among corporations created by individuals who sit on two or more corporate boards -- have been a source of research attention since the Progressive Era at the turn of the 20th century, when they were used by famous muckraking journalists, and future Supreme Court Justice Louis Brandeis, to claim that a few large commercial and investment banks controlled most major corporations.
We frequently think of two types of interlocks. A direct interlock is when the same individual sits on both boards. An indirect interlock occurs when different people from the same entity sit on two or more boards.
Interlocking directorates are a common feature of boardrooms in the United States.
Interlocking directorates are also a common feature of Hong Kong businesses.
For the most part, interlocking directorates are perfectly legal in the United States. But when a person is affiliated with two competing companies, a number of antitrust concerns can arise.
Interlocking directorates serve to promote information diffusion (Davis and Powell, 1992), facilitate collusion between firms, increase firm legitimacy and reputation (Mizruchi, 1996).
Who Rules America: The Corporate Community
Who Rules Japan? The Inner Circles of Economic and Political Power
We frequently think of two types of interlocks. A direct interlock is when the same individual sits on both boards. An indirect interlock occurs when different people from the same entity sit on two or more boards.
Interlocking directorates are a common feature of boardrooms in the United States.
- One-fifth of the 1,000 largest U.S. companies share at least one board member with another top 1,000 company
- More than 1,000 board members from the top U.S. companies sit on four or more corporate boards
- 235 of these board members sit on seven or more corporate boards
Interlocking directorates are also a common feature of Hong Kong businesses.
- The proportion of multiple directors in Hong Kong was 17%, compared to 18% in the United States.
- The mean number of positions per director in Hong Kong was 1.29, compared to 1.28 for the United States.
- Hong Kong has three times the rate of “heavy linkers,” i.e., board members who sit on more than five boards.
For the most part, interlocking directorates are perfectly legal in the United States. But when a person is affiliated with two competing companies, a number of antitrust concerns can arise.
Interlocking directorates serve to promote information diffusion (Davis and Powell, 1992), facilitate collusion between firms, increase firm legitimacy and reputation (Mizruchi, 1996).
Who Rules America: The Corporate Community
Who Rules Japan? The Inner Circles of Economic and Political Power