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Inside Director

A board member who has served as an employee, officer or other stakeholder in a company within one year of assuming a Board of Directors seat within that same company. Stands in contrast to an outside/independent director who has either never been employed with the company or has not been employed with the company for a minimum of one year before assuming a Board seat.

It general, it tends to significantly benefit a corporation to have both outside directors and inside directors sit on its Board at any given time. All Board directors are bound by a fiduciary duty to behave in the best interests of the companies they serve, but inside and outside directors tend to accomplish this aim in different ways. Outside directors serve as “fresh eyes,” may bring unique perspectives, are not tied to internal “office politics” and can observe certain company challenges more objectively than inside directors can. By contrast, inside directors bring a grounded knowledge of company operations, corporate culture and shareholder interests to the table. When appropriately balanced, inside and outside directors can help to ensure that companies thrive.

 

EXAMPLE:

In addition to a number of outside directors, Facebook’s Board of Directors boasts inside directors CEO Mark Zuckerberg and COO Sheryl Sandberg.