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Endnotes
1. The board’s stewardship on behalf of shareholders is actually wider than the three listed functions and includes executive compensation as well as other responsibilities that may vary by size and age of the organization.
2. See also Allaire and Firsirotu (2005, pp. 95–136) on the elusive link between corporate governance and performance.
3. Unless otherwise indicated, the word organization means a corporation, a firm, or an institution whose main objective is to make profits.
4. The terms board member and director are used synonymously in this study.
5. “An interlock exists when one individual sits on the board of two or more corporations, thus linking these corporations. Multiple directorships may be presumed to increase an individual’s power and the power of the firm he or she is affiliated with, since interlocks allow directors access to resources and information” (Pennings, 1980, p. ix).
6. There are prohibitions on interlocks among competing firms in the United States. The Clayton Act prohibits interlocks among industrial or commercial corporations if they are competitors (Cornell University Law School, 2007). In addition, the Depository Institution Management Interlocks Act prohibits management officials, including directors, from serving two non-affiliated depository institutions operating in the same market (FDIC, 2000). In both cases, the main concern is that interlocks could have an anticompetitive effect. The interlocks discussed in this study involve directors sitting on more than one board among noncompeting firms.
7. Appendix A lists the mandatory rules established by Bill 198 with respect to the audit committee; for instance, it must include a minimum of three members who are financially literate.