Interlocking directorate

Network diagram showing interlocks between various U.S. corporations/institutions, and four major media/telecom corporations (circled in red).

Network diagram showing interlocks of the board members of American International Group (AIG), from 2004 with other U.S. corporations.

Network diagram showing interlocks between various U.S. corporations and institutions and the Council on Foreign Relations, in 2004

Interlocking directorate refers to the practice of members of a corporate board of directors serving on the boards of multiple corporations. A person that sits on multiple boards is known as a multiple director.^[1] A direct interlock occurs when two firms share a director or when an executive of one firm sits on the board of a second firm. An indirect interlock occurs when two corporations have directors who each also serve on the board of a third firm.^[2]

Socio-political importance

Interlocks allow for upper class cohesion, coordinated action, and unified political-economic power.^[3] They allow corporations to increase their influence by exerting power as a group, and to work together towards common goals.^[4] They help the upper class maintain a class advantage, and gain more power over workers and consumers, by reducing intra-class competition and increasing cooperation.^[2][5] 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."^[6]

Interlocks act as communication channels, enabling information to be shared between boards via multiple directors who have access to inside information for multiple companies.^[1] The system of interlocks forms a "transcorporate network overarching all sectors of business".^[7] Interlocks have benefits over trusts, cartels, and other monopolistic/oligopolistic forms of organization, due to their greater fluidity, and lower visibility (making them less open to public scrutiny).^[4] They also benefit the involved companies, due to reduced competition, increased information availability for directors, and increased prestige.^[2][8]

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.^[6][9][10] 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.^[6]

Furthermore, multiple directors tend to be more frequently appointed to government positions, and sit on more non-profit/foundation boards than other directors. Thus, these individuals (known as the "inner circle" of the corporate class) tend to contribute disproportionately to the policy-planning and government groups that represent the interests of the corporate class,^[11][12] and are the ones that are most likely to deal with general policy issues and handle political problems for the business class as a whole.^[13] These individuals and the people around them are often considered to be the "ruling class" in modern politics.^[3] However, they do not wield absolute power, and they are not monolithic, often differing on which policies will best serve the interests of the upper classes.^[14]

Interlocks not only occur between corporations, but also between corporations and non-profit institutions such as foundations, think tanks, policy-planning groups, and universities.^[15][16] 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.^[3][17] 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."^[18]

Modern interlock networks

Analyses of corporate interlocks have found a high degree of interconnectedness amongst large corporations.^[19][20] It has also been shown that in-bound interlocks (i.e. a network link from external frims into a focal firm) are far more impactful that out-bound 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.^[21] Virtually all large U.S. corporations are linked together in a network of interlocks.^[22] Most corporations are within 3 or 4 "steps" from each other within this network.^[19] Approximately 15-20% of all directors sit on two or more boards.^[11] 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.^[23] Major banks, in particular, tend to be at the center of the network and have large numbers of interlocks.^[24][25] With the globalization of financial capital following World War II, multinational interlocks have become progressively more common.^[26] However, a relatively small number of individuals—a few dozen—bind this multinational network together by participating in transnational interlocks and sitting on the boards of multiple global policy groups (such as the Council on Foreign Relations).^[27]

Legality

In the United States, the Clayton Act prohibits interlocking directorates by U.S. companies competing in the same industry, if those corporations would violate antitrust laws if combined into a single corporation. However, at least 1 in 8 of the interlocks in the United States are between corporations that are supposedly competitors.^[28]

See also

• Cartel
• Insider trading
• List of people on multiple governing boards
• Oligarchy
• Price fixing
• Revolving door (politics)
• Social class

Bibliography

• Bowman, Scott R. (1996). The modern corporation and American political thought: law, power, and ideology. Penn State Press. ISBN 9780271014739. http://books.google.com/books?id=rgaZ63CVo9MC. 
• Domhoff, G. William (2006). Who Rules America?: Power, Politics, and Social Change. McGraw-Hill. ISBN 0072876255. http://books.google.com/books?id=Qs0DAQAAIAAJ. 
• Salinger, Lawrence M. (2005). Encyclopedia of white-collar and corporate crime. Vol. 1. SAGE. ISBN 9780761930044. http://books.google.com/books?id=P41ij0GoFL4C. 
• Scott, John (1997). Corporate Business and Capitalist Classes. Oxford University Press. ISBN 0198280750. http://books.google.com/books?id=iiD0oYR28gQC. 
• 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 9780195040333. http://books.google.com/books?id=S6kcCXgIqoAC. 

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 9781852783921. http://books.google.com/books?id=LJjZAAAAMAAJ. 

^[29]

References

1. ^ ^{a b} Scott, 1997: p. 7
2. ^ ^{a b c} Salinger, 2005: p. 438
3. ^ ^{a b c} John Asimakopoulos. 2009. Globally Segmented Labor Markets. Critical Sociology, 35(2):175-198.
4. ^ ^{a b} Salinger, 2005: p. 437
5. ^ Mizruchi, Mark S. & Schwartz, Michael (1992). Intercorporate relations: the structural analysis of business. Cambridge University Press. p. 58. ISBN 9780521437943. http://books.google.com/books?id=fONblZ2anq0C&pg=PA58. 
6. ^ ^{a b c} Bowman, 1996: p. 21
7. ^ Useem, 1986: p. 53
8. ^ Dogan, Mattéi (2003). Elite configurations at the apex of power. BRILL. p. 200. ISBN 9789004128088. http://books.google.com/books?id=Z6Cu8nvJplMC&pg=PA200. 
9. ^ Beder, Sharon (2006). Suiting themselves: how corporations drive the global agenda. Earthscan. p. 4. ISBN 9781844073313. http://books.google.com/books?id=y8k7swjAYSAC&pg=PA4. 
10. ^ Barrow, Clyde W. (1993). Critical Theories of State: Marxist, Neo-Marxist, Post-Marxist. University of Wisconsin Press. p. 19. ISBN 0299137147. 
11. ^ ^{a b} Domhoff, 2006: pp. 30-31
12. ^ Knoke, David (1994). Political networks: the structural perspective. Cambridge University Press. p. 159. ISBN 9780521477628. http://books.google.com/books?id=9djTlBLaOccC&pg=PA159. 
13. ^ Fennema, M. (1982). International networks of banks and industry. Springer. p. 208. ISBN 9789024726202. http://books.google.com/books?id=e7kRkULTTF4C&pg=PA208. 
14. ^ Zweig, Michael (2001). The working class majority: America's best kept secret. Cornell University Press. p. 19. ISBN 9780801487279. http://books.google.com/books?id=1dwfNxZ6c50C&pg=PA19. 
15. ^ Bowman, 1996: p. 22
16. ^ Sklair, Leslie (2001). The Transnational Capitalist Class. Wiley-Blackwell. p. 13. ISBN 9780631224624. http://books.google.com/books?id=AhERHMzaCr0C&pg=PA13. 
17. ^ Domhoff, 2006: Chapter 3
18. ^ Ackerman, Frank (2000). The political economy of inequality. Island Press. p. 55. ISBN 9781559637985. http://books.google.com/books?id=l3XDIpiifiYC&pg=PA55. 
19. ^ ^{a b} Domhoff, 2006: p. 26
20. ^ Krantz, Matt (2002-11-24). "Web of board members ties together Corporate America". USA Today. http://www.usatoday.com/money/companies/management/2002-11-24-interlock_x.htm. 
21. ^ Johannes M Pennings, 1980. Interlocking Directorates: San Francisco: Jossey Bass
22. ^ Slaughter, Sheila & Rhoades, Gary (2004). Academic capitalism and the new economy: markets, state, and higher education. JHU Press. p. 234. ISBN 9780801879494. http://books.google.com/books?id=Y-mISmAUa38C&pg=PA234. 
23. ^ Domhoff, 2006: p. 27
24. ^ Devine, Fiona (1997). Social class in Ameriontent-Type: multipart/form-datagh University Press. pp. 109–110. ISBN 9780748606665. http://books.google.com/books?id=CYEUhTYvaAkC&pg=PA109. 
25. ^ Glasberg, Davita Silfen (1989). The power of collective purse strings: the effects of bank hegemony on corporations and the state. University of California Press. p. 12. ISBN 9780520064898. http://books.google.com/books?id=yAJXVxFx8AcC&pg=PA12. 
26. ^ Scott, 1997: pp. 18-19
27. ^ Carroll, William K. & Carson, Colin (2006). "Neoliberalism, capitalist class formation and the global network of corporations and policy groups". In Plehwe, Dieter; Walpen, Bernhard; Neunhöffer, Gisela. Neoliberal hegemony: a global critique. Taylor & Francis. p. 66. ISBN 9780415373272. http://books.google.com/books?id=QTtE1VpEF40C&pg=PA66. 
28. ^ Wardrip-Fruin, Noah & Montfort, Nick (2003). New Media Reader. MIT Press. p. 480. ISBN 9780262232272. http://books.google.com/books?id=DQYXoRx9CcEC&pg=RA8-PT337. 
29. ^ Pennings, Johannes M. (1980 ) Interlocking Directorates. San Francisco: Jossey Bass

External links

• TheyRule.net -- tool for mapping out board interlocks between large corporations, foundations, nonprofits, and universities, using data from SEC filings