Horizontal Directors

Abstract

Directors wield increasing influence in corporate America, making pivotal decisions regarding corporate affairs and management. A robust literature recognizes directors’ important role and examines their incentives and performance. In particular, scholars have worried that “busy directors”—those who serve on multiple corporate boards—may face time constraints that affect their performance. Little attention, however, has been paid to directors who sit on the boards of multiple companies within the same industry. This Article terms them “horizontal directors” and spotlights, for the first time, the legal and policy issues they raise. The “horizontal” feature of directorships, a term often used in the antitrust context, could stifle competition and effectively consolidate industries, yet risks being overlooked by scholars, practitioners, and regulators alike.

This Article makes two contributions to the literature. First, it is the first to empirically identify the phenomenon of horizontal directors. It does so through an original dataset that reveals the staggering number of directors who serve on the boards of two or more companies operating within the same industry. Second, the Article uses the context of horizontal directors to illuminate the push and pull between the priorities of corporate governance and antitrust law. Horizontal directorships simultaneously raise antitrust concerns regarding collusion and coordination, which could stifle competition, while also serving the goals of corporate governance by maximizing shareholder value. This Article bridges the corporate governance and antitrust literatures, offering a set of potential reforms to address horizontal directorships.

Keywords: Directors, Corporate Governance, Antitrust, Horizontal Shareholders, Corporate Law, FTC, Busy Directors, Interlocks

JEL Classification: K10, K22, K23