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Simple English definitions for legal terms
interlocking director
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A quick definition of interlocking director:
An interlocking director is someone who serves on the boards of two or more companies that work together or have similar interests. This means they have a say in the decisions of multiple companies at the same time. It's like being on two sports teams and helping both teams win. However, some people think this can create conflicts of interest and give too much power to one person.
A more thorough explanation:
An interlocking director is a member of the board of directors who serves on the boards of two or more corporations that have related interests or do business with each other. This can create potential conflicts of interest because the director may prioritize the interests of one company over another.
For example, if a director serves on the boards of two competing companies, they may have access to sensitive information about both companies that could be used to benefit one over the other. This is why some companies have policies that limit the number of interlocking directors they can have.
Another example is a director who serves on the boards of a company and a supplier or customer of that company. This director may be more likely to approve deals or contracts that benefit the supplier or customer, even if it is not in the best interest of the company they serve on the board for.