Social capital, networks and interlocked independent directors: a Mexican case

Abstract

Purpose– The purpose of this paper is to investigate whether a pattern of interlocking directorates is emerging following reforms in Mexican corporations, and who, if any, are the powerful actors in this network. Drawing on the Bourdieusian notion of social capital, the paper also analyses theoretically the interlocking directorates, networks and powerful actors, and their influences on and potential implications for corporate governance mechanisms.Design/methodology/approach– The data used in the study consisted of 1,442 internal and external board members of the population of 126 Mexican corporations trading on the Mexican Stock Market as of January 2011. Use of social network analysis (SNA) demonstrates individuals’ links with corporations and allows the production of spatial maps to visualise the network structure of interlocking boards.Findings– Using the measures of SNA developed by Freeman (1979 and Bonacich (1972), the authors identify the most powerful and influential directors in the network structure of board members in Mexico. Board members with the greatest number of connections occupy central positions in the network. The authors also find a catalogue of corporate governance scandals. The inclusion of independent directors seems to have had no influence in ensuring better corporate governance.Research limitations/implications– Mapping out the directors’ links might offer excellent opportunities for policy makers to see how many companies a single director represents, how they share boards, and the implications for minority shareholders of sharing boards, and to understand the workloads of directors in carrying out the monitoring tasks expected of them.Originality/value– This paper makes an important contribution by employing SNA to illustrate interlocking directorates and the positions of powerful and influential actors. Examining networks of directors from a “social capital” point of view also provides an understanding of why the role of independent directors remains toothless in family-dominated corporations.