Interlocking directorate
Two or more
This practice, although widespread and lawful, raises questions about the quality and independence of board decisions. In the United States, antitrust law prohibits interlocking directorates within the same industry over collusion concerns, though legal observers have noted that this has long been unenforced.[3][4] In 2022, the Department of Justice signaled it would enforce laws on anti-competitive interlocking directorates, leading to the resignation of seven directors at five companies in October 2022.[4]
Socio-political importance
According to some observers,[who?] interlocks allow for cohesion, coordinated action, and unified political-economic power of corporate executives. They allow corporations to increase their influence by exerting power as a group, and to work together towards common goals.[5] They help corporate executives maintain an advantage, and gain more power over workers and consumers, by reducing intra-class competition and increasing cooperation.[2][6] In the words of Scott R. Bowman, interlocks "facilitate a community of interest among the elite of the corporate world that supplants the competitive and socially divisive ethos of an earlier stage of capitalism with an ethic of cooperation and a sense of shared values and goals."[7]
Interlocks act as communication channels, enabling information to be shared between boards via multiple directors who have access to inside information for multiple companies.
Some theorists believe that because multiple directors often have interests in firms in different industries, they are more likely to think in terms of general corporate class interests, rather than simply the narrow interests of individual corporations.[7][10][11] Also, these individuals tend to come from wealthy backgrounds, socialize with the upper classes, and tend to have worked their way up the corporate hierarchy, making it more likely that they have internalized values that will cause them to personally support policies that are beneficial to business in general.[7]
Furthermore, multiple directors tend to be more frequently appointed to government positions, and sit on more
Interlocks not only occur between corporations, but also between corporations and non-profit institutions such as foundations, think tanks, policy-planning groups, and universities.[16][17] They can also be seen as a subset of connections in a larger upper class social network which includes all of the aforementioned types of institutions as well as elite social clubs, schools, resorts, and gatherings.[18][19] Multiple directors are "roughly twice as likely as single directors to be in the Social Register, to have attended a prestigious private school, or to belong to an elite social club."[20]
Modern interlock networks
Analyses of corporate interlocks have found a high degree of interconnectedness amongst large corporations.[21][22] It has also been shown that inbound interlocks (i.e. a network link from external firms into a focal firm) have a much greater impact and importance than outbound interlocks, a finding that laid the foundation for further research on inter-organizational networks based on overlapping memberships and other linkages such as joint ventures and patent backward and forward citations.[23] Virtually all large U.S. corporations are linked together in a network of interlocks.[24] Most corporations are within 3 or 4 "steps" from each other within this network.[21] Approximately 15–20% of all directors sit on two or more boards.[12]
The largest corporations tend to have the most interlocks, and also tend to have interlocks with each other, placing them at the center of the network.
Legality
In the
Recent reinvigoration of enforcement
In 2022, the Department of Justice (DOJ) Antitrust Division signaled it would reinvigorate enforcement against anti-competitive interlocking directorates after decades of dormant enforcement.[3] In October 2022, it was reported that antitrust scrutiny brought on by Assistant Attorney General Jonathan Kanter led to the resignation of seven directors from the boards of five companies.[4] According to Bloomberg News, private equity firms including Blackstone Inc. and Apollo Global Management are currently under federal interlocking directorate scrutiny.[33]
1970 graphs
In 1979 Levin and Roy reported[34] on interlocking directors at 797 corporations in 1970 where the board of directors ranged from 3 to 47 members, with a mean size of 13. Only 18% of the 8623 directors were on more than one board, though the mean number of interlockers for a corporation was 8. The components of the graph were 62 isolated boards, four pairs of corporations interlocked by one or more directors, a triad of interlocked corporations, and the greater component of 724 corporations. For an arbitrary pair of corporations in this component the median path length was 3. Levin and Roy tested the graph for cut points and failed to find any with their search starting with corporations with large boards.
In a study of clustering in the graph, Levin and Roy demonstrated the use of a bipartite graph with corporations listed on one side and directors with multiple seats on the other. The clusters become evident in a physical model using elastic bands and paper clips. The directors and corporations are listed arbitrarily to begin and the elastic bands placed as edges of the bipartite graph. Then a perusal of the elastics may suggest a re-ordering on one side or the other with the elastics slightly less tense. After some iteration this procedure reveals a cluster structure in the bipartite graph.
See also
References
- ^ a b Scott, 1997: p. 7
- ^ a b c Salinger, 2005: p. 438
- ^ a b Demblowski, Denis (November 4, 2022). "DOJ Is Shaking Up World of Interlocking Directorates". Bloomberg Law. Retrieved 2022-11-04.
- ^ a b c "U.S. says seven board directors resigned under antitrust pressure". Reuters. 2022-10-19. Retrieved 2022-11-04.
- ^ a b Salinger, 2005: p. 437
- ISBN 978-0-521-43794-3.
- ^ a b c Bowman, 1996: p. 21
- ^ Useem, 1986: p. 53
- ISBN 978-90-04-12808-8.
- ISBN 978-1-84407-331-3.
- ISBN 0-299-13714-7.
- ^ a b Domhoff, 2006: pp. 30-31
- ISBN 978-0-521-47762-8.
- ISBN 978-90-247-2620-2.
- ISBN 978-0-8014-8727-9.
- ^ Bowman, 1996: p. 22
- ISBN 978-0-631-22462-4.
- S2CID 145514921.
- ^ Domhoff, 2006: Chapter 3
- ISBN 978-1-55963-798-5.
- ^ a b Domhoff, 2006: p. 26
- ^ Krantz, Matt (2002-11-24). "Web of board members ties together Corporate America". USA Today.
- ^ Johannes M Pennings, 1980. Interlocking Directorates: San Francisco: Jossey Bass
- ISBN 978-0-8018-7949-4.
- ^ Domhoff, 2006: p. 27
- ISBN 978-0-7486-0666-5.
- ISBN 978-0-226-53109-0.)
{{cite book}}
: CS1 maint: multiple names: authors list (link - ISBN 978-0-520-06489-8.
- ^ Scott, 1997: pp. 18-19
- ISBN 1-56584-596-X.
Farfield was by no means exceptional in its incestuous character. This was the nature of power in America at this time. The system of private patronage was the pre-eminent model of how small, homogenous groups came to defend America's—and, by definition, their own—interests. Serving at the top of the pile was every self-respecting WASP's ambition. The prize was a trusteeship on either the Ford Foundation or the Rockefeller Foundation, both of which were conscious instruments of covert US policy, with directors and officers who were closely connected to, or even members of American intelligence.
- ISBN 978-0-415-37327-2.
- ISBN 978-0-262-23227-2.
- ^ Nylen, Leah; Lim, Dawn (October 28, 2022). "Private Equity Firms Probed by US on Overlapping Board Seats". Bloomberg. Retrieved 2022-11-04.
- ISBN 9780123525505
- Bowman, Scott R. (1996). The modern corporation and American political thought: law, power, and ideology. Penn State Press. ISBN 978-0-271-01473-9.
- Domhoff, G. William (2006). Who Rules America?: Power, Politics, and Social Change. McGraw-Hill. ISBN 0-07-287625-5.
- Salinger, Lawrence M. (2005). Encyclopedia of white-collar and corporate crime. Vol. 1. SAGE. ISBN 978-0-7619-3004-4.
- Scott, John (1997). Corporate Business and Capitalist Classes. Oxford University Press. ISBN 0-19-828075-0.
- Useem, Michael (1986). The Inner Circle: Large Corporations and the Rise of Business Political Activity in the U.S. and U.K.. Oxford University Press. ISBN 978-0-19-504033-3.
Further reading
- Domhoff, G. William (August, 2005); Interlocking Directorates in the Corporate Community.
- Mizruchi, Mark S. (August, 1996); "What Do Interlocks Do? An Analysis, Critique, and Assessment of Research on Interlocking Directorates". Annual Review of Sociology, Vol. 22: 271–298.
- Phillips, Peter S. (June 24, 2005) "Big Media Interlocks with Corporate America".
- Scott, John (1990). The Sociology of Elites, Volume 3: Interlocking directorships and corporate networks. University of Michigan Press. ISBN 978-1-85278-392-1.
External links
- TheyRule.net—tool for mapping out board interlocks between large corporations, foundations, nonprofits, and universities, using data from SEC filings