An Institutional Perspective on Corporate Control and the Network of Interlocking Directorates

This article focuses on the implications for corporate control on networks of contact. Analysis of corporate control has followed two mostly separate tracks. The first looks at direct control over corporate decision making through stockholding or stockholding combined with representation on boards of directors. The second track of analysis conceptualizes control as being exercised through a network of relationships between firms. The network analysis techniques used in the study of interlocking directorates are not generally familiar to economists. This is probably a result of the focus of economic analysis on competitive relationships. Such relationships assume the independence of the actors involved. The major difficulty in using interlocking directorships to study control of corporate decision making is that their function and content are variable and basically unverifiable. As with networks of social, civic, and political ties, the network of interlocking directorates is a complex institution that serves several functions simultaneously. Direct evaluation of the effects of this network are not possible. Its longevity and stability, however, argue for its importance and the need to study network forms of control.