Director interlocks and conflicts of interest

IN my previous article, "Multiple Directorships - How many is enough?" (The Business Times, May 19, 2014), I examined the concern of time fragmentation of a director who is on too many boards. Another concern with multiple directorships which I will now explore is the creation of director interlocks between firms that generate conflicts of interest which may impede directors in the proper discharge of their duties.

Before discussing the two variants of interlocking directorships - horizontal and vertical - it is important to note that interlocks are not restricted to firms that appoint common board members.

The OECD report, Antitrust issues involving minority shareholding and interlocking directorates, suggests that the concept of interlocks should be extended to cover situations where, for example, a director of one firm is a top executive in anoth…