Interlocking directorate

An interlocking directorate is a network of business leaders who are members of boards of directors of CORPORATIONs. Any situation in which a director sits on the board of two or more companies simultaneously creates an interlocking directorate. While interlocking directorates are most associated with Japanese business, they are a powerful force in U.S. business practices. Individuals serving on more than one BOARD OF DIRECTORS provide an informal means of communication and facilitate the building of business relationships. The old saying “It’s not what you know but who you know that counts” summarizes the benefits of interlocking directorates. Depending on how information and influence is used, interlocking directorates can aid small companies attempting to build strategic relationships or assist large companies in finding new sources of ideas, talents, or products. Members of a corporate board of directors have a fiduciary responsibility to direct corporate policy in the best interest of the SHAREHOLDERS. Corporate ANNUAL REPORTs usually state directors’ financial interests in the company but rarely state their other financial and managerial relationships. An individual who sits on the board of two companies has access to advance knowledge of what each company intends to do. In advising on policy, the board member is likely to use his or her inside information to guide business-strategy decisions, even without directly revealing the other company’s plans. This could benefit either both companies the board member represents or one company at the expense of the other. Research into the impact of interlocking directorates is limited by lack of information regarding the use of information to influence corporate policy. Studies suggest interlocking directorates
• have been responsible for rapid diffusion of POISON-PILL STRATEGIES
• influence corporate-structure decisions
• influence corporate acquisitions
• influence the decision to pursue ISO STANDARDS
• influence decisions on corporate charitable contributions