Interlocking Directorates

DEFINITION of 'Interlocking Directorates'

A common business practice where a member of a company's board of directors also serves on another company's board or within another company's management. Under antitrust legislation, interlocking directorates are not illegal as long as the corporations involved do not compete with each other.

BREAKING DOWN 'Interlocking Directorates'

Interlocking directorates were outlawed in specific instances where it gave a few board members control over an entire industry and allowed them to synchronize pricing changes, labor negotiations and so on. This does not prevent a board director from Company A from serving on the board of a Company B, which is a client of Company A.


Although there are still many opportunities for collusion through interlocking directorates, recent trends in corporate governance have shifted much more power to the CEO. Due to this shift, many CEOs have been able to appoint and dismiss board members as they please, as opposed to being influenced by them.

RELATED TERMS
  1. Directorate

    An organization headed by a director. In finance, directorate ...
  2. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  3. Outside Director

    Any member of a company's board of directors who is not an employee ...
  4. Dummy Director

    A person on a company's board of directors who votes and acts ...
  5. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  6. Regulation L

    One of the regulations set forth by the Federal Reserve. Regulation ...
Related Articles
  1. Investing

    What Does the Board of Directors Do?

    Every public company must have a board of directors. These boards establish administrative policies including the hiring and firing of executives, the distribution of dividends, and executive ...
  2. Executive Compensation

    Retired Execs: How Much Do Corporate Boards Pay?

    If you have the right skill set, getting a seat on a company board can be a lucrative and stimulating way to spend some of your new free time.
  3. Professionals

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  4. Professionals

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  5. Professionals

    B. Investment Company Components

    Investment companies have several different groups that serve specialized functions. Each of these groups plays a key role in the investment company’s operation.
  6. Markets

    Fundamental Analysis: Qualitative Factors - The Company

    By Ben McClureBefore diving into a company's financial statements, we're going to take a look at some of the qualitative aspects of a company. Fundamental analysis seeks to determine the intrinsic ...
  7. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  8. Investing

    What CEOs Actually Do

    CEOs are responsible for the overall operation of a business, and are usually elected by shareholders and the board of directors.
  9. Investing

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...
  10. Fundamental Analysis

    Ethical Investing: Corporate Governance

    By Amy Fontinelle Corporate governance looks at how companies manage themselves and their relationships with shareholders and stakeholders. Ethical investors want to make sure that corporations ...
RELATED FAQS
  1. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Answer >>
  2. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  3. What is the difference between a president and a chief executive officer? Can there ...

    In general, the chief executive officer (CEO) is thought of as the highest ranking officer in a company while the president ... Read Answer >>
  4. What is a staggered board?

    A staggered board of directors (also known as a classified board) is a board that is made up of different classes of directors. ... Read Answer >>
  5. What is the investor rights movement?

    The investor rights movement, also called shareholder activism, refers to the efforts of shareholders of publicly traded ... Read Answer >>
  6. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center