outside director

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Outside director

A director of a company who is not an employee of that company and brings in outside experience to help make board decisions.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Outside Director

A member of a publicly-traded company's board of directors that is not otherwise employed by or engaged with the company. That is, he/she does not represent shareholders or major executives in the company. Outside directors are thought to be advantageous because they offer objectivity and have little or no chance of conflict of interest. However, there is the possibility that an outside director might be unengaged with the issues involved in the company's governance. The Sarbanes-Oxley Act of 2002 mandates that a certain percentage of boards of directors be outside directors. It is illegal for outside directors to sit on multiple boards in the same industry as this may result in conflicts of interest.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

outside director

A member of a firm's board of directors who is not employed in another capacity by that firm. An example is the president of one firm who serves as a director of another firm. Some people believe that at least some outside directors are needed to give a board balance and to protect stockholders' interests. Compare inside director.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
This has been reflected in our selection of outside directors. At certain times, we have asked global business experts to be outside directors who could provide us with advice on how to promote our sales worldwide, but on other occasions we have asked experts on maintaining product safety to be outside directors who could provide advice on this.
The world's fifth-largest steelmaker has since taken the process of selecting Kwon's successor under the auspices of a special council composed of five outside directors. The problem is most of the five directors were those who looked the other way when previous governments meddled in selecting Kwon and his predecessor They are also close to the current and previous POSCO executives aiming at the chairman's post.
A key objective of this article is to highlight the important role that financial reporting plays in reducing the informational advantage of managers over outside directors, shareholders, and other stakeholders (for example, regulators).
Using a sample of 688 outside directors appointed to the boards of S&P 500 companies from 2005 to 2010, we find that companies that announce the appointment of an industry expert director earn significantly higher announcement returns than companies that announce the appointment of a new director without industry experience (on average about 0.4% to 0.7% larger).4 This finding is not only statistically, but also economically significant relative to the whole sample of 688 new outside director appointments (where the overall average two-day announcement return is approximately 0.08%).
(1997) examine the impact of the target firm's independent outside directors on takeover premiums during takeover attempts by tender offers.
While outside directors said the level of communication was "just right" (88 percent), only about half of management shared that sentiment (56.7 percent) based on a survey done by compensation consultant firm Pearl Meyer & Partners.
Outside help doesn't always have to come in the form of an advisory board or group of outside directors; many retailers turn to a single third-party consultant for guidance, while others participate in industry roundtables through NRHA, other membership organizations or their buying groups.
In many studies of corporate boards researchers have categorized the role of outside directors in large firms into three types: control, service, and resource dependence (see e.g., Johnson, Daily, & Ellstrand, 1996; Peng, 2004).
may accept outside directors who would oversee its business management in the case the beleaguered utility is placed under effective government control, sources close to the matter said Thursday.
Emphasizing founder-involved firms (i.e., firms that are floated by their original founders), this article examines interlinks between founders' prestige and selection of inside and outside directors, and short-term performance measured in terms of IPO "underpricing." The results provide evidence of positive association between founders' and directors' prestige, but there is substitution between inside and outside directors' prestige.