Board Interlocks and Corporate Governance

2014 ◽  
Author(s):  
Michal Barzuza ◽  
Quinn Curtis
Keyword(s):  
Corporate Governance ◽  
Board Interlocks

scholarly journals Board Interlocks as a Diffusion of Strategic Information – Does it Work? A Polish Case

2021 ◽  
Vol 26 (4) ◽  
pp. 589-616
Author(s):  
Justyna Światowiec-Szczepańska ◽  
Łukasz Małys
Keyword(s):  
Corporate Governance ◽  
Corporate Culture ◽  
Supervisory Board ◽  
Developed Countries ◽  
The Other ◽  
Strategic Decision ◽  
Western European Country ◽  
Strategic Information ◽  
Interlocking Directorates ◽  
Board Interlocks

Several theories point to the influence of board interlocks on the diffusion of important resources, mainly information. Empirical confirmation of the information functionality of the interlocking directorates network was obtained in the case of network research under the Anglo-Saxon model of corporate governance as well as the continental model in developed countries. Since the early 1990s another model of corporate governance in CEE countries has been developed. The specific determinants of the development of this model do not allow us to unequivocally state similar causes and consequences of interlocking directorates in relation to the most frequently studied western corporate governance models. The aim of this study is to determine the importance managers attach to these relationships within a corporate network as a source of strategic information that is important to the company’s strategic decision-making process, in the context of the Polish governance model. The research employs the case-study method and presents the results of five case studies of companies listed on the Warsaw Stock Exchange. The research, on the one hand, suggests that the network embeddedness of Polish listed companies is of minor significance; on the other hand, it pointed to the existence of two main types of corporate networks: one inwardly directed and focused on supervisory board members’ controlling function performed with a view to protecting the shareholders’ equity ownership, and the other orientated towards external relationships, often distant from the original industry, in order to obtain information that supports new initiatives. What seems to most determine the behaviour of company managers is the corporate culture resulting from the presence of a foreign owner from a Western European country. In general, the findings confirm the importance of the network of interlocking directorates more as an instrument of control than diffusion of strategic information.

Competing institutional pressures in corporate governance reform: the role of board interlocks and industry peers

2017 ◽  
Vol 17 (3) ◽  
pp. 538-559 ◽  
Author(s):  
Mario Krenn
Keyword(s):  
Corporate Governance ◽  
Institutional Change ◽  
Resistance To Change ◽  
Content Type ◽  
Structural Context ◽  
Corporate Governance Code ◽  
Board Interlocks ◽  
Social Structural ◽  
Industry Peers

Purpose This study aims to examine the effects of competing influences emanating from firms’ social structural context (i.e. sent and received board of director interlocks and industry peers) on the adoption of an institutionally contested corporate governance code provision. Design/methodology/approach The corporate governance code provision of interest in this research recommends that German firms listed on German stock exchanges should disclose the individual remuneration arrangements for their board members. This paper uses 945 firm year observations from 2002 to 2006, the time period during which the adoption of this provision was voluntary for firms, to examine the role of firms’ social structural context in the legitimization process of this provision. Findings The results show that sent board interlocks to firms that defy pressures to adopt this practice have an equally pronounced but opposing effect on its institutionalization process. Received interlocks are inconsequential in this process. The results also provide evidence for the existence of competing influences emanating from firms’ industry peers. In contrast to the effects associated with sent board interlocks, at the industry level, peer acquiescence has a more pronounced effect than peer defiance. Furthermore, the practice’s legitimacy among firms’ peers moderates the effects of sent board interlocks. Originality/value The results of this paper suggest that a balanced approach to studying institutional change in corporate governance needs to acknowledge the co-existence of conflicting signals regarding the spread of new institutional models. The findings suggest that firms’ social structural context plays a central role in processes of contested institutional change. Board interlocks and industry peers carry the potential to facilitate institutional change and facilitate institutional continuity and resistance to change. However, not all board interlocks are of equal importance, and industry peers constitute a source of legitimacy to which directors forming the interlocks attend.

Board Interlocks and Diversification Strategies

2019 ◽  
Author(s):  
Christine Shropshire
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Information Exchange ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Future Research ◽  
Corporate Structure ◽  
Strategic Issues ◽  
Board Interlocks ◽  
Diversification Strategies

The board of directors serves multiple corporate governance functions, including monitoring management, providing oversight on strategic issues, and linking the organization to the broader external environment. Researchers have become increasingly interested in board interlocks and how content transmitted via these linkages shapes firm outcomes, such as corporate structure and strategies. As influential mechanisms to manage environmental uncertainty and facilitate information exchange, Board interlocks are created by directors who are affiliated with more than one firm via employment or board service and allow the board to capture a diversity of strategic experiences. One critical corporate decision that may be influenced by interlocks and strategic diffusion is diversification (i.e., in which products and markets to compete). Directors draw on their own experiences with diversification strategies at other firms to help guide and manage ongoing strategic decision-making. There is broad scholarship on interlocks and the individuals who create them, with extant research reporting that some firms are more likely to imitate or learn from their interlock partners than others. Prior findings suggest that the conditions under which information is transmitted via interlock, such as an individual director’s experience with diversification strategies at other firms, may make that information more influential to the focal firm’s own strategic decision-making related to diversification. A more holistic framework captures factors related to the individual interlocking director, the board and firm overall and the context surrounding these linkages and relationships, helping to promote future research. Understanding the social context surrounding board interlocks offers opportunities to more deeply examine how these interconnections serve in pursuit of the board’s fundamental purpose of protecting shareholder investment from managerial self-interest. Overall, integrating multi-level factors will offer new insights into the influence of board interlocks on firm strategies on both sides of the partnership. Expanding knowledge of how inter-firm linkages transmit knowledge influential to board decision-making can also improve our understanding of board effectiveness and corporate governance.

The “ties that bind” board interlocks research: a systematic review

2016 ◽  
Vol 39 (11) ◽  
pp. 1516-1542 ◽  
Author(s):  
Nai H. Lamb ◽  
Philip Roundy
Keyword(s):  
Systematic Review ◽  
Corporate Governance ◽  
Design Methodology ◽  
Future Research ◽  
Review Of The Literature ◽  
Comprehensive Review ◽  
Content Type ◽  
Global Context ◽  
Board Interlocks ◽  
Methodological Rigor

Purpose Board interlocks are a phenomenon of widespread prevalence and one of the most vibrant topics in corporate governance research. However, despite sustained academic interest in interlocks, there has not been a comprehensive review of the literature in nearly two decades. To address this need for an up-to-date review, this paper aims to conduct an assessment and integration of the empirical research on board interlocks. Design/methodology/approach In reviewing the board interlocks literature, the “systematic review” approach, which emphasizes methodological rigor and transparency, has been used. Using this method, 81 empirical papers that became the focus of this analysis have been identified. Findings This review reveals that board interlocks research can be categorized based on the theoretical lens used, its focus on antecedents or outcomes of interlock activities and the perspective of the study (i.e. firm- or director-level). Moreover, a number of commonly examined themes have been identified. Several unexpected omissions in the literature have also been uncovered. For instance, it was found that scholars have neither examined the implications of engaging in interlocks in a global context nor have they explored the phenomenon of international interlocks (i.e. interlocks between firms located in different countries). Originality/value In developing a deeper understanding of the board interlocks literature, this review identifies several topics and disciplines that, if pursued, could enrich the literature and open promising avenues for future research.

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