Dissenting Directors

Expressions of dissent by corporate directors might be a valuable attribute of good corporate governance indicating the existence of an active board, but dissent is not necessarily a sign of independence, and can be disruptive and ill-motivated. Notwithstanding the potential importance of directors’ dissent, the subject has been largely neglected in the academic literature, also due to the scarcity of empirical or anecdotal evidence. We examine empirically dissent of directors—expressed either by voting against a resolution of the board, or by resigning from the board—using handpicked data from the Italian market. Differently from the few other works on this issue, we also consider dissent expressed by non-independent directors. After an overview of the existing literature on directors’ dissent, we discuss the legal framework of dissent under Italian law. We then present our dataset and discuss some methodological issues. In our empirical analysis, we address four questions: (a) What are the topics that directors more often dissent on? (b) What are the characteristics of dissenting directors in terms of age, gender, education, compensation, and who appointed them, as well as in terms of the organization of the board (e.g., if the positions of President and CEO are separated)? (c) In what types of corporations is dissent more common, in particular with respect to economic performance? (d) What are the consequences of dissent in terms of cumulative abnormal returns and volatility of the shares? Based on the results of the analysis, we offer some conclusions and raise some policy questions.