This study analyzed the composition of boards of directors of thirteen publicly traded newspaper companies to examine the extent of director appointment from financial institutions or leading advertisers. The results revealed ingrained ties to financial institutions and leading advertisers from 1988 to 2000. A pooled cross-sectional time series analysis showed that a company's financial situation is associated with the subsequent appointment of directors. The results confirmed the view that interlocks are associated with inter-firm resource dependence. However, most of the variance in the ratios of board members from financial interests to total board members was accounted for by Idiosyncratic variations among the corporations. The effect of capital dependency was much smaller than the company-specific unit effects.
Corporate interlocks, in which a person affiliated with one firm sits on the board of directors of another company, are a prevalent feature of U.S. corporations. A study of 456 Fortune 500 manufacturing firms found that more than 70% had at least one officer who also sat on the board of a financial institution.1 The newspaper business is not much different. Research showed that the boards of newspaper companies consisted heavily of officers from finance and law firms. Of the 131 outside directors of seventeen companies, only 13% had any newspaper background.2
The issue of corporate interlocking in the newspaper industry is not novel. Critics have long argued about possible adverse effects of ties between newspapers and major corporations. Dreier and Weinberg noted that "such ties may have adverse journalistic consequences. Some of these may be subtle-unconscious self-censorship, for example. In other cases, the consequences have been manifest-reporters pressured, stories unassigned, or killed when written.. .The concern centers on the flow of information and vitality of journalism... "3
Although there has been much research on corporate interlocks among other U.S. companies,4 few studies have been conducted to identify these ties in the news media, where there are implications for greater impact. Furthermore, interlocks with leading advertisers and publicly traded newspapers have received little attention, despite frequent concern about the influence of advertisers on editorial content. Because advertising is a source of capital unique to the media business, other disciplines have not investigated advertiser ties. Examining news media connections to leading advertisers may uncover interlocking ties to financial resources, which would be especially important.
In particular, the question of when and under what circumstances news media companies maintain or create those ties remains unclear. The literature is full of anecdotal evidence about the consequences of interlocks and other media-corporate ties.5 Media critics often cite potential conflicts of interest from corporations and advertisers,6 but few studies have examined the antecedents of such ties. Cross-sectional studies are available,7 but limitations in the method prevent clear answers to what factors led to the ties. Interlocking networks change over time, depending on different economic situations. Questions regarding causes of corporate ties can only be addressed longitudinally.
Much of the mass communication literature has taken board of directors composition as a given, seeking to examine its implications rather than its determinants. The purpose of this study is to examine the composition of boards of directors in publicly traded newspaper companies to determine factors affecting appointment of representatives from financial institutions or leading advertisers to the newspaper companies' boards.
Theoretical Background on Corporate Interlocking
Studies of interlocking boards of directors in the United States have long flourished in sociology, political science, and economics. With the explosion of research on inter-organizational relations, they became even more prominent in the 1990s. …