Outside directors are more likely to provide independent and objective oversight of management. Some of the key differences between inside and outside directors are:
• Independence: Outside directors are typically seen as more independent because they are not involved in the day-to-day operations of the company. They are not members of management. This allows them to provide more objective oversight.
• Perspective: Outside directors bring a different perspective to the board since they are not part of the company's internal culture and operations. This can be valuable in providing an outside viewpoint.
• Accountability: Outside directors may be more likely to hold management accountable since they are not involved in executing the company's strategy. They can provide more objective performance evaluations.
• Expertise: Outside directors often bring specific expertise in areas like finance, law, or industry knowledge that can be valuable for the company.
• Compensation: Outside directors are typically compensated only through board fees while inside directors also have management compensation. This can further incentivize outside directors to provide independent oversight.
So in summary, outside directors tend to be seen as having more independence, objectivity and oversight capabilities compared to inside directors who are part of management. However, both types of directors play important roles in governing a company.