Board Interlocks and Corporate Governance

38 Pages Posted: 12 Nov 2014 Last revised: 7 Aug 2017

Michal Barzuza

University of Virginia School of Law

Quinn Curtis

University of Virginia School of Law

Date Written: November 10, 2014

Abstract

This paper argues that director interlocks, a phenomenon in which directors sit on more than one corporate board, ought to be an object of expanded discussion in corporate governance research and practice. Thus far, interlocks have attracted little attention from legal scholars, and when interlocks have received attention from regulators, it is usually negative. A growing body of evidence points to interlocks as having a significant role in governance propagation and evolution. Core governance practices, including ones that are closely monitored by professionals, propagate via interlocks. Interlocks are not purely channels for spreading information; they have a significant impact even in an informationally rich environment. Both bad and good governance practices propagate via interlocks, and overall board connectivity is associated with higher returns. Interlocks help explain similarities and variations in corporate governance. Drawing strong normative conclusions in light of the state of the literature would be premature. Instead, we summarize the literature on interlocks and governance, analyze how and why interlocks could matter for governance, and suggest that, at the very least, recognizing interlocks as facilitating the diffusion of governance, and highly connected firms as potentially influential in setting governance practices, is important.

Keywords: Corporate law; Corporate Governance; Boards of Directors; Interlocks

JEL Classification: G3, G30

Suggested Citation

Barzuza, Michal and Curtis, Quinn, Board Interlocks and Corporate Governance (November 10, 2014). Delaware Journal of Corporate Law (DJCL), Vol. 39, No. 3, 2014; Virginia Law and Economics Research Paper No. 2014-16. Available at SSRN: https://ssrn.com/abstract=2521614 or http://dx.doi.org/10.2139/ssrn.2521614

Michal Barzuza (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Quinn Curtis

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

HOME PAGE: http://www.law.virginia.edu/lawweb/faculty.nsf/FHPbI/2298852

Register to save articles to
your library

Register

Paper statistics

Downloads
207
rank
134,006
Abstract Views
1,124
PlumX