Are Dissenting Directors Rewarded?

Abstract

I explore whether directors who resign in dissent from their board are rewarded in the labor market for directors. Using a hand collected sample of 278 boardroom disputes reported in 8-K filings during 1995-2006, I show that firms which have disputes are small, highly levered, have poor profitability, and have boards dominated by management. I find that dissent is not rewarded. For all types of directors across all types of disputes, directors who resign in protest experience a net loss in board seats of 85% over the five year period following the dispute. This means dissenting directors are not able to recover the seat they give up by obtaining additional board seats at other public firms. For these dissenting directors it appears that dissent is its own reward.

Keywords: Board of Directors, Director Turnover, Director Disuptes, Director Dissent

JEL Classification: G34, G30, K22, D74