When Outside Directors Resign: Go Publicly or Leave Quietly?

Because outside directors are ostensibly independent from management, their role includes being willing to protect shareholder interests by standing up to the CEO. A recent study by Michael Dewally and Sarah Peck, both of Marquette University, provides some answers about the possible motives and circumstances surrounding outside directors' decisions to publicly announce their board resignations. Dewally and Peck found that directors who left "quietly" were more likely to be "professional" directors -- retirees or significantly older executives -- than directors who left publicly. Dewally and Peck also found that directors who resigned because they were "too busy" were more likely to be active professionals. Dewally and Peck found that boards of firms subjected to public criticism by resigning directors do make changes.