Outside director

An outside director (사외이사/社外理事) or non-executive director (NED, NXD) is a member of the board of directors of a company, who is not engaged in daily business of the company. They are not employees of the company or affiliated with it in any other way and are differentiated from inside directors, who are members of the board who also serve as executive directors or corporate officers of the company.

If outside directors are not allowed to hold shares in the company, they are usually called as "independent directors". In general, outside directors have responsibilities in the following areas:
 * Strategy: Outside directors should constructively challenge and contribute to the development of strategy.
 * Performance: Outside directors should scrutinise the performance of management in meeting agreed goals and objectives and monitoring and where necessary removing senior management, and in succession planning.
 * Risk: Outside directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.
 * People: Outside directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and where necessary removing senior management, and in succession planning.

Outside directors should also provide independent views on:
 * Resources
 * Appointments
 * Standards of conduct

Key words
outside director, executive director, corporate governance, majority shareholder

Corporate governance
Outside directors are the custodians of the Corporate governance process. They are not involved in the day-to-day running of business but monitor the executive activity and prevent abusive corporate powers by majority shareholders in an objective manner.

Outside directors derived from the Anglo-Saxon corporate practices. While Japan adopted external auditor, Korean companies were obliged to accept outside directors from 1998 in the aftermath of the IMF Crisis. A series of amendments to the Commercial Act (상법/商法) introduced outside directors so as to reflect minority shareholders' opinion on the corporate mangement.

Previously only state-invested companies allowed outside directors in the management, but now most stock companies differentiate the chairman of the board from the president or chief executive officer (CEO) of the executive. All the listed companies are required to elect outside directors from former government officials, professors or executive directors of other companies at the general shareholders' meeting. One or three outside directors consitute the audit committee replacing the standing auditor.

Criticism
Outside directors have drastically changed the landscape of the corporate governance. In the past, the board of directors functioned as a decision-making body like the shareholders' meeting. Nowadays the board of directors consisting outside directors serve as an independent body for check and balance from the corporate management.

Contrary to general expectations as witnessed in the United States, outside directors, who have been usually elected from the pool of former government officials and professors friendly to the top management, tend to abstain themselves from being actively involved in the management.