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Interlocking Directorates Swot Analysis

Autor:   •  April 16, 2018  •  Case Study  •  889 Words (4 Pages)  •  148 Views

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Introduction

Nowadays, one of the more and more popular and familiar models is interlocking directorates. There are many researches over this term as well as its roles in doing business of companies. Besides strength, weakness is also a major factor of interlocking directorates that has a strong influence to global relations. Interlocking directorates in the global business area can be viewed as both the cause and effect of globalization. Interlocking directorates and corporate globalization cannot be separated from each other, especially when it is the time of the more complicated linkages between countries and countries, companies and companies.

Main body

Overview of interlocking directorates

The term “Interlocking directorates” refers to the general combined board. It reflects the situation in which one or more persons engaged in the management of two or more companies. In order to understand what is an interlocking directorate, one thing must be firstly understand is about management of major corporations. Major corporations are operated under the control of steep managerial hierarchies, with ultimate power vested, in principle in the board of directors. Boards are comprised of anywhere from 10 to 25 members. According Mizruchi (1996), an interlocking directorate, in its most basic form, occurs when a person from one organization take the seat on the board of directors of another one. In general, it refers to the linkages among corporations in which the people who created them take part in the corporate boards.

Strength and Weakness of interlocking directorates for Global relations

Strengths

There is some strength of interlocking directorates for global relations. Firstly, interlocking directorates act as communication channels where multiple directors can share information of boards. Interlocking directorates also have capacity to make a strong influence to globalization and give interlocking of societies a push on a global scale.

Secondly, interlocking directorates horizontally and vertically facilitate coordination among companies serving in a particular company (Szalacha, 2010). This coordination is known as cartels that are created through interlocking directorates serve as better communication channels. The channels will enable firms to interact with each other regarding many fields such as pricing, advertising, research & development competition, resource sharing. It also helps firms to reduce reducing the level of uncertainty in making decision process.

Thirdly, interlocking directorates allow the cooperation of the various companies in an industry would be able to consolidate the industry’s key goals. This plays a huge role for the industry as a whole in debate with the government regarding industry

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