Final answer:
Outside directors are more likely to watch out for the interests of shareholders because they have a fiduciary duty to act in the best interests of the shareholders.
They are independent, not employed by the company, and bring a fresh perspective to the board.
Step-by-step explanation:
Outside directors are more likely to watch out for the interests of shareholders of their firm because they are not employed by the company and therefore do not have a personal stake in the company's success.
They are independent and have a fiduciary duty to act in the best interests of the shareholders.
This means that they are more likely to make decisions that maximize shareholder value and protect the shareholders' investments.
For example, if the company's top executives propose a risky business venture that may benefit themselves but could potentially harm the shareholders, outside directors are more likely to question and challenge the decision to ensure that it is in the best interests of the shareholders.
Furthermore, outside directors bring a fresh perspective and diverse experiences to the board, which can lead to better decision making. They can provide valuable insights and contribute to the overall governance and strategic direction of the company, ultimately benefiting the shareholders.