An Independent director (also 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.
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.
In India
in India as of 2004, a majority of the minimum seven directors of public companies having share capital in excess of Rs. 50 million (Rs 50,000,000) should be independent. Clause 49 of the listing agreements defines independent directors as follows:
- For the purpose of this clause the expression 'independent directors' means directors who apart from receiving director's remuneration, do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in judgement of the board may affect independence of judgement of the directors.
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