How should board independence and interlocks be evaluated for governance quality?

• A. Interlocks always improve governance.
• B. Assess whether interlocks create conflicts of interest or anti-competitive concerns; avoid excessive cross-director ties.
• C. Interlocks are irrelevant to governance quality.
• D. You should maximize cross-director ties regardless of conflicts.

Answer: (B)

Board independence matters because it preserves objective oversight and protects fiduciary duties. Interlocks can influence a director’s judgment when they sit on multiple boards, potentially creating conflicts of interest or anti-competitive concerns if ties cross competitive lines or dilute loyalty to the company. The best way to judge governance quality is to examine whether these interlocks threaten independence and to avoid excessive cross-director ties. That means looking for conflicts of interest, evaluating antitrust or anti-competitive risks, and implementing policies to limit outside board seats, require independence assessments, ensure disclosures, and require recusal from related matters. Interlocks are not automatically beneficial, they are not irrelevant, and maximizing cross-director ties regardless of conflicts would undermine independent, loyal governance.