Interlocking directorates — where the same individual sits on the boards of rival companies — have long been associated with behind-the-scenes influence and potential corporate collusion. When antitrust legislation first moved against the practice in 1914, future Supreme Court justice Louis Brandeis famously condemned it as “the root of many evils.” More than a century later, regulators have once again turned their attention to these overlapping board roles, reviving a long-standing concern about market power and unfair coordination.
Beginning in 2022, renewed enforcement efforts by US authorities triggered a wave of boardroom exits, with at least 21 directors stepping down from positions seen as problematic under competition rules. The intention was to curb anti-competitive behaviour and protect consumers, but emerging evidence suggests the crackdown may have produced unintended side effects within corporate leadership structures.
New research from Texas McCombs indicates that while regulators aimed to weaken collusion, the outcome may have been a deterioration in corporate governance driven by the loss of seasoned industry expertise. The study finds that the directors most likely to resign were those with the deepest experience, leaving companies — particularly smaller ones — without valuable institutional knowledge built up over decades.
Christian Hutzler, an assistant professor of accounting, explains that the impact extended beyond firms directly targeted by enforcement actions. Even companies not under investigation appeared to adjust their boards in response to the regulatory climate, signalling a broader chilling effect. According to Hutzler, organisations observing the crackdown often pre-emptively reshaped their leadership to avoid scrutiny, amplifying the overall loss of experience across the market.
Analysing 1.6 million director-company-month observations from 2004 to 2022, Hutzler and his co-authors found that interlocking board memberships steadily increased over nearly two decades before reversing abruptly in late 2022. In a single quarter following the enforcement surge, the proportion of interlocked directors fell by 0.8 percentage points — the steepest decline ever recorded. Those who left typically possessed an average of 47 years of board experience within their industries, while replacements, when found at all, averaged only three years. Many vacant seats remained unfilled for months, particularly at smaller firms, which were far more likely to lose the shared director in competitive pairs.
Perhaps most strikingly, the research uncovered little evidence that interlocking directorates were driving widespread collusion in the first place. Instead, these experienced board members often strengthened oversight, pushing out underperforming executives and improving the returns on research and development spending without increasing risk. By removing some of the most capable figures in corporate governance, the crackdown may ultimately weaken firms’ ability to find qualified leadership in the future. While the shift could create opportunities for new voices, Hutzler warns that industry experience — one of the most valued traits in board appointments — may become increasingly scarce.
More information: Dain C. Donelson et al, Does antitrust enforcement against interlocking directorates impair corporate governance? Journal of Accounting and Economics. DOI: 10.1016/j.jacceco.2025.101815
Journal information: Journal of Accounting and Economics Provided by University of Texas at Austin