DEFINITION of 'Inside Director'

A board member who is an employee, officer or stakeholder in the company. Inside directors - and outside directors, for that matter - have a fiduciary duty to the company of which board they sit on, and are expected to always act in the best interests of the company. Because of their specialized knowledge about the inner workings of the company, a strong board of inside directors is a key element in its success.

BREAKING DOWN 'Inside Director'

Inside directors typically include a company's top executives, such as the chief operating officer, the chief financial officer and the chief operating officer, as well as representatives of major shareholders and lenders, and representatives of other stakeholders, such as labor unions.

An institutional investor who is considering making a sizable investment in a company will often insist on appointing one or more of the investor's representatives to the company's board of directors as a condition of such investment.




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