Does the Prohibition of Concurrent Directorships Actually Weaken Companies? Surprising Results Revealed by Data

Does the Prohibition of Concurrent Directorships Actually Weaken Companies? Surprising Results Revealed by Data

Strengthening antitrust measures is intended to curb the market dominance of large corporations and "behind-the-scenes coordination" to protect consumers. Many people likely understand it this way. However, this "supposedly correct enforcement" might be weakening companies elsewhere. The current issue is not about prices or app stores, but rather the heart of the company—the board of directors.


1) The Core Issue: "Dual Directorships"

The focus is on the practice called "interlocking directorates," where the same individual serves on the boards of multiple competing companies. This has long been suspected as a structure for "behind-the-scenes deals" and has historically been criticized in the context of antitrust.


In the United States, around 2022, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) reportedly intensified enforcement in this area, leading to a series of director resignations. The aim of the crackdown is clear: if competitors are connected through the same director network, there is a concern that "aligning the atmosphere" on prices, investments, hiring, etc., becomes easier.


2) However, Data Shows "Loss of Experience"

New research has shown that those who left the board after the crackdown were the "more experienced individuals." Moreover, the blow is greater not for large, robust companies, but rather for smaller companies.


The research team tracked director resignations and appointments using large-scale data and confirmed the transition of dual directorships. As a result, dual directorships, which had been increasing from the 2000s to 2022, reversed in a "record-breaking decline" in the latter half of 2022. Up to this point, it can be said that "the crackdown was effective."


However, at the same time, the following "gaps" are widening.

  • Experience Gap: While departing directors have long experience in the industry, successors tend to be less experienced, and there are increasing cases where no successor is found, leaving seats vacant.

  • Smaller Companies Are More Disadvantaged: Directors are more likely to leave from the smaller of the competing pair of companies.

  • New Dual Directorships Are Less Likely to Form: The probability of new appointees forming dual directorship networks decreases, thinning the circulation of insights.


The board of directors is not just a "decoration." It influences the quality of corporate governance by checking CEO personnel, strategy, and supervising investment decisions. If experienced directors leave and vacancies increase because successors cannot be found, the supervisory function is likely to weaken.

3) "Hotbed of Collusion" or "Fount of Governance Wisdom"

What complicates this issue is that interlocking directorates do not necessarily do "only bad things." The research does not strongly show evidence of widespread collusion as assumed by authorities; rather, it suggests that companies with interlocking directors may have stronger management oversight.


For example, it is easier to prompt the replacement of underperforming CEOs, and research and development investments are more likely to lead to better outcomes. In other words, having someone who knows the field of competing companies may have led to "strict governance" rather than "lax governance."


This is the dilemma of antitrust policy.

  • As a competition policy, they want to cut off connections and eliminate "room for doubt."

  • As corporate governance, they want to leave routes for the flow of experience and insights.

Both have high public value. However, if one is pushed too strongly, the other gets hurt.

4) "Distortions in the Talent Market" Created by Crackdowns

Another point of discussion is "who will become the next director." When "veterans prone to dual directorships" are removed due to crackdowns, naturally, alternative candidates are needed. Companies tend to seek individuals with similarly long industry experience, but if that pool is thin, a scramble ensues.


As a result, the following quiet disparities are likely to occur:

  • Rising Director Compensation

  • Talent is skewed towards large companies (due to superior brand and compensation)

  • Small and medium-sized enterprises are more likely to remain with vacancies
    Such quiet disparities arise.


Furthermore, boards of directors strongly operate as "networks." People are chosen based on past achievements and introductions of trust, so if existing networks are severed, even if formal diversity increases, practically, it can lead to situations where "suitable candidates cannot be found."

5) Reactions on Social Media: A Topic Where Support and Concerns Simultaneously Rise

This topic is well-received on social media because "justice (strengthening regulations)" and "reality (weakening governance)" clash. In fact, reactions are divided into three main groups.


A. The "Regulation is Necessary Anyway" Group
The stance is that "the room for competitors to connect behind the scenes should be eliminated" and "even if there are side effects, the first step should be to nip the bud of wrongdoing." Given the historical view that "dual directorships are bad," this position intuitively garners support.


B. The "Side Effects Are Too Big" Group
Concerns include "if experienced supervisors leave, managers are more likely to run amok" and "the fact that smaller companies are more affected could actually worsen the competitive environment." If the purpose of the crackdown is "to promote competition," then weakening weaker companies seems counterproductive.


C. The "It's a Design Issue, We Should Change the Approach" Group
Rather than a binary choice, this group believes it should lean towards "conditional" or "enhanced transparency" rather than "blanket prohibition." For example,

  • Rules for Blocking Competition-Sensitive Information

  • Clarification of Dual Directorship Scope (defining which markets are considered "competitors")

  • Alternative Measures for Strengthening Oversight (development and supply of independent directors)
    Policy design discussions like these are gaining attention.


Moreover, a post by the researcher themselves on LinkedIn reporting the publication of the paper received reactions such as "interesting" and "good publication outlet" from readers leaning towards academia and practitioners, indicating high interest as a problem statement. The academic atmosphere seems to prefer moving the discussion towards "design theory including side effects" rather than simple "praise of regulation."


6) What to Watch From Here

This topic may emerge as a "leading role from a supporting role" in future antitrust debates. This is because, while it is not as flashy an issue as prices or M&A, it directly affects the quality of corporate decision-making = competitiveness.


There are three points of interest.

  1. Whether the Increase in Vacancies is Temporary or Structural (whether the supply of director talent can catch up)

  2. Whether Governance of Small Companies is Weakening (signs of fraudulent accounting, performance deterioration, delays in CEO replacement, etc.)

  3. Whether a Design Connecting "Competition Policy" and "Governance Policy" Emerges (common ground for authorities, companies, and investors)


Antitrust is not just about "strengthening is good." If the system that protects competition erodes corporate wisdom and oversight, there is a risk of lowering the overall quality of the market in the long term. What is needed is not just to debate the pros and cons of crackdowns, but "how to design with side effects in mind." This research has made that discussion more real.


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