Why do people agree to become directors of two or more corporations? For most of them, it`s all too easy to say they`re making a lot of money, from tens of thousands to a few hundred thousand per board, because these high levels of compensation are fairly new. They are more likely to receive various intangible elements, such as prestige, information, and new connections. Based on his interviews with business leaders, sociologist Michael Useem (1984) concluded that working on two or three corporate boards broadened the horizons of senior executives, what he called “business analysis.” It has also shown that those who sit on two or more boards are more likely to participate in policy focus groups and receive appointments to government advisory committees (Useem, 1980). Therefore, becoming a director and then a nested director can help put a person at the center of the power structure. This finding has recently been supported by a sophisticated “small world” analysis of the interdependencies between corporations, foundations, policy focus groups and cultural organizations for the years 1962 to 1995 (Barnes, 2005). Today, enterprise lockdowns are analyzed through desktops with larger databases and sophisticated network programs. Databases are large matrices that contain information about connections between people and groups. From these matrices, one can derive either a corporate or organizational network based on shared administrators, or an interpersonal/social network based on shared board memberships. That is, matrices contain a “duality of persons and groups” (Breiger, 1974).
This is worth noting because this essay will deal with both “corporate networks,” i.e., the links between companies created by interlocking management, and “social networks,” i.e., the links between people due to the fact that they sit on the same board of directors of the company. Interdependent directorates were prohibited in certain cases where they gave certain board members disproportionate control over an industry. In some cases, this has opened the door to price changes, labor negotiations, etc. Nested directions do not preclude a board member from serving on a client`s board of directors. Nested directions are legal and usually occur when one person works as an officer or director for two companies. However, if these two companies are in competition, the overlapping directorates may violate antitrust law. For example, if one company buys another company and a director or officer acts as a director or member of its board of directors of both companies, this can lead to a problem with nested management. Data on nested directions can be obtained from several sources. For publicly traded U.S. companies, power of attorney. Interconnected directorates are a business practice in which a member of the board of directors of one company also sits on the board of directors of another company or on the management of another company. Under antitrust law, interlocking directorates are not illegal as long as the companies concerned do not compete with each other.
Boards of directors are composed of internal members and independent (external) members. Insiders are the main shareholders, founders and executives, while external directors are more objective forces. They usually have extensive experience in managing or managing other large companies and bring a new dimension to the decision-making process. Freelancers can also dilute the concentration of power and help align the interests of shareholders with those of insiders. Typically, companies try to avoid a nesting problem before it occurs, such as during a merger or acquisition. Is this the case with Aramark? I doubt it. First, there is no established interdependent leadership among board members associated with the food and beverage industry. In addition, only a few directors of Aramark sit on the boards of directors of other affiliates. Rather, it appears that Aramark has a Board of Directors composed of members who have experience in relevant areas of activity (e.g., hospitality, logistics).
Social network analysis involves the study of social structures using networks and graphs that allow sociologists to visualize and measure the characteristics of the connections that connect individuals, groups, or organizations. Rooted in the formal sociology of Georg Simmel (e.g., dyads versus triads), anthropology (e.g., kinship diagrams), social psychology (e.g., group dynamics), and mathematical sociology, social network analysis has been used to study friendship and acquaintance networks, terrorist organizations, criminal drug markets, disease transmission and sexual relations, to name a few. The study of nested directors has been useful to power structure researchers in helping us define the corporate community and learn more about how boards work. These studies show that many business owners don`t just sit in their home business and take care of their own businesses. By coming together in boards of directors, those who are interlocking directors develop social cohesion and common perspectives that go hand in hand with their economic power base. A near violation of the lockdown rule occurred in 2009 when Google announced that its board member, Arthur D. Levinson, would resign because he also sat on Apple`s board of directors. Earlier this year, Apple announced that Google CEO Eric E. Schmidt was stepping down from Apple`s board. Since the two companies are competitors, they would have violated antitrust rules if they had not taken steps to separate their bodies. We might as well start with Citigroup – the largest commercial bank in the United States since 2005 – and the 25 companies with which it is affiliated.
This colorful chart is made possible by the Board Analyst tool on TheCorporateLibrary.com. It shows how 13 people create “interlocks” (also known as “links” or “network links”) between Citigroup and 25 other companies. Two of the 25, Alcoa and Comcast, share two directors with Citigroup, so they have a “double lock”. None of Citigroup`s 25 subsidiaries are banks, as nesting between companies in the same industry is illegal due to the excitement generated by the potential negative impact of interlocking directorships. Spend a few minutes exploring Theyrule.net and exploring the connections between companies and other organizations. Can you find examples of interlocking directions between supposedly competing companies? How many steps or “degrees of differentiation” are organizations from their competitors? You can also examine the structural properties of networks. Who serve as “bridges” or bridge structural gaps between businesses and not-for-profit organizations? In the United States, the Clayton Act prohibits the interweaving of management of competing U.S. companies in the same industry if those companies would violate antitrust law if they were consolidated into a single company. However, at least 1 in 8 of lockouts in the U.S. are between companies that are supposed to be competitors.
[30] Nesting Directorate refers to the practice of members of the board of directors of a corporation who sit on the board of directors of several corporations. A person who sits on multiple boards is called a multiple director. [1] Two companies have a direct overlap when a director or officer of one company is also a director of the other, and an indirect overlap when a director sits on the board of directors of a third company. [2] While this practice is widespread and legal, it raises questions about the quality and independence of Board decisions. In 1979, Levin and Roy reported nested directors in 797 companies in 1970, where the board of directors ranged from 3 to 47 members, with an average size of 13. Only 18% of the 8623 directors sat on more than one board, although the average number of Interlockers for a company was 8. The components of the graph were 62 individual boards, four pairs of companies intertwined by one or more directors, a triad of nested companies, and the larger component of 724 companies. For any pair of firms in this component, the average trip length was 3. Levin and Roy tested the graph for intersections and found none because they started with companies with large boards. Mizruchi, M.S.
1996. What do locks do? An analysis, critique and evaluation of research on nested directions. Annual Review of Sociology 22: 271-298. As you can see, several Aramark directors sit on the boards of other companies (The data on TheyRule is not up-to-date and did not include two additional Aramark directors. I was able to find one of them, Richard Dreiling, and include it in the radar map). In this case, there appears to be overlap in at least three relevant industries: food and beverage suppliers (e.g., Pepsi, Coca-Cola, Heinz), food storage manufacturers (e.g., Rubbermaid), and retail chains that rely on low-wage service workers and large, complex supply chains (e.g., Office Depot, JCPenney, Lowes). Some of the organizations are also large conglomerates that own dozens of subsidiaries in the food and beverage industry. Pepsi, for example, owns Gatorade, Tropicana, Lipton Tea and Quaker Foods, which can also be purchased in the campus dining room. Is this some kind of malicious corporate conspiracy? I doubt it. If Aramark is involved in food supply, one would expect the company`s management to have experience in the relevant industries. But it does show how interconnected boards are within certain industries, a phenomenon called nested leadership.