Independent director

An Independent director (also sometimes known as an outside director) is a director (member) of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. Independent Directors do not own shares in the company. (Some sources state non-executive directors are different from independent ones in that non-executive director are allowed to hold shares in the firm while independent directors are not.) In the US, independent outsiders make up 66% of all boards and 72% of S&P 500 company boards, according to The Wall Street Journal.

Legal requirements

US

The NYSE and Nasdaq stock exchange standards for independent directors are similar. Both require that "a majority of the board of directors of a listed company be 'independent,'" Both allow compensation for directors of $120,000/year or less (as of August 2008).)

The NYSE states:

Nasdaq's rules say that an independent director must not be an officer or employee of the company or its subsidiaries or any other individual having a relationship that, in the opinion of the company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.