Editing Board of directors (section)

==Directors==
The directors of an organization are the persons who are members of its board. Several specific terms categorize directors by the presence or absence of their other relationships to the organization.<ref>This section was developed from numerous definitions in [http://definitions.uslegal.com/i/inside-director/ USLegal.com], [http://www.businessdictionary.com/definition/executive-director.html BusinessDictionary.com] {{Webarchive|url=https://web.archive.org/web/20110303050359/http://www.businessdictionary.com/definition/executive-director.html |date=3 March 2011 }}, [http://dictionary.reference.com/browse/executive+director Dictionary.com], The Free Dictionary by Farlex ([http://financial-dictionary.thefreedictionary.com/Inside+Director "inside director"]; [http://www.thefreedictionary.com/executive+director "executive director"]; [http://financial-dictionary.thefreedictionary.com/outside+director "outside director"]; [http://www.thefreedictionary.com/nonexecutive+director "non-executive director"]), [http://www.macmillandictionary.com/dictionary/british/executive-director Macmillan Dictionary], and  [https://web.archive.org/web/20210414034735/http://www.economics-dictionary.com/definition/non-executive-director.html Economics-dictionary.com].</ref>

===Honorary members===
Corporations may designate a former senior executive and ex-board member as an honorary board member, a position that does not carry any executive authority but represents recognition of the person's corporate governorship and performance.<ref>{{cite journal |last1=Moore |first1=Charles M. |last2=Plog II |first2=Leonard H. |title=Honorary Directors of Financial Institutions: More Liability, Less Honor |journal=Banking Law Journal |date=1992 |volume=109 |page=233}}</ref>

===Inside director===
An inside director is a director who is also an employee, officer, chief executive, major [[shareholder]], or someone similarly connected to the organization. Inside directors represent the interests of the entity's stakeholders, and often have special knowledge of its inner workings, its financial or market position, and so on.

Typical inside directors are:
* A chief executive officer (CEO) who may also be [[Chairperson|chair of the board]]
* Other executives of the organization, such as its [[chief financial officer]] (CFO) or [[executive vice president]]
* Large shareholders (who may or may not also be employees or officers)
* Representatives of other stakeholders such as labor unions, major lenders, or members of the community in which the organization is located

An inside director who is employed as a manager or executive of the organization is sometimes referred to as an executive director (not to be confused with the title [[executive director]] sometimes used for the CEO position in some organizations). Executive directors often have a specified area of responsibility in the organization, such as finance, marketing, human resources, or production.<ref name="Ivestopedia">{{Cite web |title=Executive Director |url=http://www.investopedia.com/terms/e/executive-director.asp |access-date=24 May 2013 |publisher=Investopedia}}</ref>

===Outside director===
{{Main|Independent director}}

An outside director is a member of the board who is not otherwise employed by or engaged with the organization, and does not represent any of its stakeholders. A typical example is a director who is [[President (corporate title)|president]] of a firm in a different industry.<ref name="Investopedia 2">{{Cite web |title=Outside Director |url=http://www.investopedia.com/terms/o/outsidedirector.asp |access-date=24 May 2013 |publisher=Investopedia}}</ref> Outside directors are not employees of the company or affiliated with it in any other way.

Outside directors bring outside experience and perspectives to the board. For example, for a company that serves a domestic market only, the presence of CEOs from global multinational corporations as outside directors can help to provide insights on export and import opportunities and international trade options. One of the arguments for having outside directors is that they can keep a watchful eye on the inside directors and on the way the organization is run. Outside directors are unlikely to tolerate "insider dealing" between inside directors, as outside directors do not benefit from the company or organization. Outside directors are often useful in handling disputes between inside directors, or between shareholders and the board. They are thought to be advantageous because they can be objective and present little risk of conflict of interest. On the other hand, they might lack familiarity with the specific issues connected to the organization's governance, and they might not know about the industry or sector in which the organization is operating.

===Terminology {{anchor|Classification}}===
*''Director'' – a person appointed to serve on the board of an organization, such as an institution or business.
*''Inside director'' – a director who, in addition to serving on the board, has a meaningful connection to the organization
*''[[Outside director]]'' – a director who, other than serving on the board, has no meaningful connections to the organization
*''Executive director'' – an inside director who is also an executive with the organization. The term is also used, in a completely different sense, to refer to a CEO
*''[[Non-executive director]]'' – a director (inside or outside) who is not an executive with the organization
*''De facto director'' – an individual who acts as a director of the company but has not actually or validly been appointed as such.
*''Shadow director'' – an individual who acts as a director of the company but is not a named director (a ''de jure'' director) and does not claim or purport to act as director.
* ''Nominee director'' – an individual who is appointed by a shareholder, creditor or interest group (whether contractually or by resolution at a company meeting) and who has a continuing loyalty to the appointors or other interest in the appointing company

Individual directors often serve on more than one board.<ref name="Businessdictionary">{{Cite web |title=Executive Director |url=http://www.businessdictionary.com/definition/executive-director.html |access-date=24 May 2013 |website=Business Dictionary |archive-date=28 June 2013 |archive-url=https://web.archive.org/web/20130628140202/http://www.businessdictionary.com/definition/executive-director.html |url-status=dead }}</ref> This practice results in an [[interlocking directorate]], where a relatively small number of individuals have significant influence over many important entities. This situation can have important corporate, social, economic, and legal consequences, and has been the subject of significant research.<ref>{{Cite journal |last=Lamb |first=Nai Hua |date=2017 |title=Does the Number of Interlocking Directors Influence a Firm's Financial Performance? An Exploratory Meta-Analysis |url=http://t.www.na-businesspress.com/AJM/LambN_Web17_2_.pdf |archive-url=https://ghostarchive.org/archive/20221009/http://t.www.na-businesspress.com/AJM/LambN_Web17_2_.pdf |archive-date=2022-10-09 |url-status=live |journal=American Journal of Management |volume=17 |issue=2 |pages=47–57 |doi=10.33423/ajm.v17i2.1757 |doi-broken-date=1 November 2024 |access-date=2019-07-24}}</ref>