When outside directors resign: go publicly or leave quietly?

Deskripsi

Directors resign publicly for two primary reasons: conflict-related issues (e.g., uncooperative management, weak boards, or financial irregularities) or being "too busy" (often linked to deteriorating firm performance). Conflict-related resignations were more common among younger, finance-savvy directors serving on audit/compensation committees, who sought to protect their reputations by distancing themselves from poorly performing firms. These resignations often triggered positive outcomes, such as management shake-ups and improved stock performance. In contrast, "quiet" resignations were typically made by older, retired directors with less reputational risk. The study highlights the dual role of public resignations—as both a failure of sustained governance and a disciplinary mechanism for weak boards.