Interlocking Directorates: A Strategy for Reducing Environmental Uncertainty

Interlocking directorates among corporations are common, despite statutory attempts to limit interlocking. Through interlocking, companies may gain any of four benefits that reduce environmental uncertainty: horizontal coordination linking competitors; vertical coordination linking an organization with suppliers of inputs or receivers of outputs; expertise; enhanced reputation. Antitrust legislation implies that the maintenance of uncertainty in the marketplace through competition is a social good, but reducing uncertainty through interlocking may be a profit-maximizing strategy of benefit to business firms and their shareholders.