The term inside director refers to a board of director member that is also an employee or officer of the company. A company’s chief executive officer that is also a member of its board of directors would be considered an inside director.
A board of directors is a recognized group of select individuals who jointly oversee the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Publicly traded companies are required to have a board of directors.
Employees of a company that are also a member of its board of directors are inside directors. For example, if the chief executive officer of a company is also a member of its BOD, that individual would be considered an inside director. Since inside directors have direct knowledge of the company’s operations, their participation and input is essential to the successful decision-making process of the board.
The BOD’s powers, duties and responsibilities are determined by government regulations and the organization’s own constitution and bylaws. The primary responsibility of the BOD is to make non-operating decisions on behalf of the organization or its shareholders. The number of inside directors is typically limited because of perceived, or actual, conflicts of interest.