The ability of boards to perform their roles depends largely on their composition. Board composition refers to the number of directors and type of members as determined by the usual insider or outsider classification. Several empirical studies in other country have concluded that Board composition determines a board’s power as an instrument of corporate control and contributes to company performance. Therefore, the purpose of this study is to determine whether or not outside directors also improve company's performance in listed companies on the Tehran Stock Exchange.This study examines the relationship between board composition with firm performance in a sample of 72 listed companies on TSE for the years 2003-2005.The ratio of outside directors as independent variable is measure of board composition and the performance of the firm has been measured by Return on equity (ROE), Net Profit Margin, Gross Profit Margin,
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