Maman (1999) proposed that in societies where business groups are the distinctive unit organizing the economy the interlocking directorate is one of the means employed to control and coordinate firms in the groups. This organizational arrangement seems to be an intentional strategy of the groups to achieve control and coordination.
The findings of our preliminary study reveal that almost all the interlocking ties were within business groups in our sample. This pattern is the result of the family affiliated and professional directors sitting on various boards of firms in the group. We also found that there are more horizontal than vertical internal interlocking ties between the companies. In other words, parent companies share professional managers between their affiliated companies to improve coordination among sister companies and to benefit professional experience of their manager in different business area. When we take a closer look to the social ties between the boards of directors, we observe family interlocks between the same group affiliated companies. This is not a very surprising result when we take into consideration the fact that majority of the BG in Turkey are owned and controlled by family. However, 60 percent of the interlock is comprehended by professional managers. We can say that there is a greater representation of professional managers in the top management teams of family business.
However, these results should be interpreted cautiously given the limitations inherent in this study. The limitation of this study in terms of generalizability of the findings should be recognized. This paper presents early result of a research project and comprehend finding of a limited sample size namely ISE 100 and the interlock between these companies. In order to have more comprehensive understanding of the phenomenon, we think that future studies had to enlarge the sample size of the research. Preliminary results show that there are substantial relationship between social ties and business group corporate governance structure. However, more sophisticated research should be done to understand the role of family ties, companies’ characteristics (firm size, sector of activity, age and diversification) and the impact of interlocks on the performance of the firms.
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* This research project is supported by Galatasaray University. Financial support of Galatasaray University Research Project Fund is gratefully acknowledged.