Interlocking Directorate
An interlocking directorate exists when the same person sits on the oversight bodies of multiple companies at the same time. Such personnel overlaps are common in the tech industry but are closely watched by competition authorities.
Large companies are not run solely by their management teams. Above them sits an oversight body that reviews the most important decisions and appoints or dismisses the executives. In Germany this body is called the Aufsichtsrat, in the US the Board of Directors. An interlocking directorate exists when the same person sits on such bodies at two or more companies at the same time. The firms are then linked through personnel even though they are entirely separate legal entities. The German term for this is Aufsichtsratsverflechtung or Doppelmandat.
What a single person achieves at two tables
Anyone sitting on an oversight body learns things that no one else learns. This includes pricing strategies, planned products, profit margin figures, and acquisition plans. If the same person sits on the boards of two companies, this knowledge travels along, at least in their head. If the two companies are competitors, this becomes a problem for competition.
That is why antitrust laws prohibit such arrangements between direct competitors. In the US, this is governed by Section 8 of the Clayton Act of 1914. The US competition authority FTC sent letters to several companies in 2022 and 2023, after which more than a dozen individuals resigned their mandates. Those affected included, among others, investment firms with seats at multiple companies in the same industry.
However, interlocks also have a harmless side. Experienced managers are scarce, and their knowledge is valuable to young companies. A startup benefits when someone who has already guided a company through an IPO sits on its own board. Antitrust law therefore does not target every multiple role, only those between competitors.
Direct and indirect interlocks
The simplest form is the direct interlock. Person A sits on the board of Company X and simultaneously on the board of Company Y. Such cases can be found in the companies' annual reports, since members must be listed by name there.
Harder to detect is the indirect interlock. In this case, two different people sit on the boards of X and Y, but both work for the same investor. Formally, no one is doubly represented, but in practice the investor concentrates influence over both firms. This exact construction is common among venture capital investors in the tech industry, since they are often invested in multiple companies within the same market.
A third path runs through observer seats, so-called board observer seats. Whoever holds such a position may attend meetings and read all documents, but may not vote. Legally this is not a mandate, but in practice the information still flows. Authorities have therefore begun scrutinizing such positions more closely as well.
Interlocks in the AI market
The term usually appears in business news when a large corporation takes a stake in an AI startup. Microsoft held an observer seat at OpenAI in 2023 and gave it up again in 2024 after competition authorities in the EU and the UK raised questions. Similar discussions arose around Amazon's and Google's stakes in the rival Anthropic.
The background is always the same. The market for AI models is young and shaped by only a few providers. When the same corporations simultaneously supply chips, rent out data centers, invest, and sit on boards, the line between partner and owner blurs. Authorities then examine whether a stake effectively amounts to an acquisition that they should have had to approve.
A common misconception is that an interlocking directorate is automatically illegal. That is not true. It is only prohibited between competitors and above certain revenue thresholds. Anyone interested in the power structures of an industry can find the names of board members in any annual report and trace the connections themselves.