Independent Outside Director

AAA

DEFINITION of 'Independent Outside Director'

A member of a company's board of directors who was brought in from outside the company. Because an independent outside director has not worked with the company for a period of time (typically for at least the previous year), he or she is not an existing manager and is generally not tied to the company's existing way of doing business.

INVESTOPEDIA EXPLAINS 'Independent Outside Director'

The general consensus among stockholders is that independent directors improve the performance of a company through their objective view of the company's health and operations. They do not have to pander to other management personnel in order to retain their jobs. Stockholders and politicians pushed for more independent outside directors in the wake of the Enron collapse in the early part of the 2000s.

RELATED TERMS
  1. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  2. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  3. Outside Director

    Any member of a company's board of directors who is not an employee ...
  4. Sarbanes-Oxley Act Of 2002 - SOX

    An act passed by U.S. Congress in 2002 to protect investors from ...
  5. Enron

    A U.S. energy-trading and utilities company that housed one of ...
  6. Andersen Effect

    A reference to auditors performing more careful due diligence ...
Related Articles
  1. Evaluating The Board Of Directors
    Insurance

    Evaluating The Board Of Directors

  2. The Basics Of Corporate Structure
    Investing Basics

    The Basics Of Corporate Structure

  3. Evaluating A Company's Management
    Active Trading Fundamentals

    Evaluating A Company's Management

  4. What Are Corporate Actions?
    Bonds & Fixed Income

    What Are Corporate Actions?

Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center