Best practices for good corporate governance encourages the addition of independent outside directors to boards in order to maintain accountability and objectivity.
An additional advantage of an independent outside director is that they do not have to worry about retaining their job within the company and can make their voices heard in a more objective manner (according to some).
Stockholders and politicians pushed for more independent outside directors for large corporations in the wake of the Enron collapse in the early part of the 2000s.
The consensus was that the lack of outside perspective and accountability masked many of the deep issues and false claims that were occurring and allowed to repeat within the company.
Independent outside directors are members of a firm’s board of directors who are unaffiliated with the company itself. In contrast to insiders, outside directors are thought to be more objective and bring a different perspective to the management of a firm.
Best practices for good corporate governance encourages the addition of independent outside directors to boards in order to maintain accountability and objectivity.
From the Book – ‘ Know Everything about Corporate Social Responsibility ‘
Available on Amazon.in
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- Corporate Governance and the Board of Directors
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