Interlocks or cross directorship refers to the situation where directors sit on more than one board....

Interlocks or cross directorship refers to the situation where directors sit on more than one board. Briefly explain TWO (2) advantages of interlocks or cross directorship.

Expert Solution

Interlocking directories is a business practice where in a member of one campany's director also serves on the another company's board or within another Company's management.Under the antitrust legislation, interlocking directorates are not illegal as long as the corporations do not compete with each other

Interlocking directorates were outlawed in specific instances where in they gave few board members outsized control over an industry. In some cases this opened door for them to synchronize pricing changes , labour negatations , and more. Interlocking directorates does not prevent a board director from serving on a cleints' board

One near violation of this rule occured in 2009 when google announced that its board member Aurthur D. Levinson was stepping down since he also served on the the board of Apple. Earlier in the year , Apple announced that Google CEO , Eric E . Sacmidt was stepping down from the Apple board. since these two comapines are competitors , they would have viloated antitrust laws if they had not to taken steps to seperate their boards.

Advantages

1. Some organization may entertain establising interlocking directorates for inter-organizational reasons . interlock could be a means for managing uncertain issues related to major supplies , top customers or some thing else.

2. cost advantage to the Company
Now a days Expertise is highly prized and experienced board directors are in demand . As a result directors are often invited serve on morethan one board,

ekkarill92 answered 2 years ago

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