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Business Law
Social Darwinism

What is the weaknesses of cross directorship?


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September 05, 2007 12:34PM

In a typical cross-directorship situation, a director of company X becomes a director of company Y, and likewise a director of Y joins the Board of X. This sort of mutual arrangement can help to emphasise links between 2 companies, but may also lead to directors having conflicts of interest as they are naturally thinking about their other directorship (a linked company) instead of the company they are sitting in. If such arrangements are fully disclosed, the rest of the Board (and the shareholders) should be able to judge the director's actions, but cross-directorships still represent a danger and are not viewed in a positive light by most codes of corporate governance