Directing the Labor Market : The Impact of Shared Board Members on Employee Flows

Using resume data on over 45 million U.S. workers, we find that the flow of employees between a pair of firms sharply drops by about 20% when the firms start to share a director on their boards. We find no trend prior to initiation, and the reduced flows persist throughout the overlapping period. This relationship is stronger in settings where firms are more likely to benefit from lower competition for each other’s employees: between firms with a similar workforce, located in the same geographical area, and of similar size, between firms in the same product market, and between firms with greater historical flows of employees between the two companies. The drop in flows is most pronounced for high-skilled employees, who are likely more costly to replace. The results suggest that shared directors facilitate cooperative behavior in the labor market