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. Enron

    A U.S. energy-trading and utilities company that housed one of ...
  2. Outside Director

    Any member of a company's board of directors who is not an employee ...
  3. Andersen Effect

    A reference to auditors performing more careful due diligence ...
  4. Inside Director

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

    A group of individuals that are elected as, or elected to act ...
  6. Sarbanes-Oxley Act Of 2002 - SOX

    An act passed by U.S. Congress in 2002 to protect investors from ...
RELATED FAQS
  1. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  2. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  3. When is a bond's coupon rate and yield to maturity the same?

    The collapse of Enron – and its subsequent fallout – is perhaps the most infamous event in modern American corporate history. ... Read Full Answer >>
  4. How can an investor determine a company's annual return from looking at its financial ...

    The funds in a share premium account cannot be used for a company's general expenses. These funds are restricted in terms ... Read Full Answer >>
  5. What are the key differences between pro forma statements and GAAP statements?

    The U.S. generally accepted accounting principles (GAAP) require companies to adhere to uniform reporting standards that ... Read Full Answer >>
  6. How do companies identify and manage business risk?

    In each stage of the business life cycle, companies face both internal and external risks that can have detrimental effects ... Read Full Answer >>
Related Articles
  1. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  2. Investing Basics

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  3. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  4. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  5. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  6. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  7. Professionals

    Understanding Operations Management

    Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize profits.
  8. Investing News

    A New Corporate Governance Initiative In Japan

    Expectations are low that Japan can create a corporate governance climate that meets global standards, but a new initiative is aimed at doing just that.
  9. Stock Analysis

    Will American Airlines Fall Back To Earth In 2015?

    The airline industry enjoys blockbuster profits, and American Airlines Group has been a key beneficiary of the favorable trends that have lifted stocks.
  10. Stock Analysis

    Qualcomm's New Buyback Program Is Well-Timed

    Qualcomm announced after market close on Monday that they had approved a new stock buyback program, authorizing to repurchase $15 billion in shares.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center