Interlocking Directorates

Interlocking Directorates – An interlocking directorate is a company board member that also sits on the board on at least one other company, if not more than one.  This is a perfectly legal position, although it can be illegal if one of the other businesses is a competitor.  This scenario sets the stage for a “conflict of interest”, or possibly the exchange of intercompany information that could be challenged as “insider trading” and illegal in a court of law.  Sitting on the board of two similar companies, could hinder fair competition.  Usually a clause in the member’s contract addresses this issue.