DGCL § 141(b) provides that:
Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier resignation or removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events.
The American Bar Association’s authoritative Corporate Director’s Guidebook recommends that:
If, after a thorough discussion, a director disagrees with any significant action the board is taking, the director should consider abstaining or voting against the proposal. The director should also consider requesting that the abstention or dissent be recorded in the meeting’s minutes. Except in unusual circumstances, taking such a position should not cause a director to consider resigning. Resignations should be considered if a director believes that management is not dealing with the directors, the shareholders, or the public in good faith or that the information being disclosed by the corporation is inadequate, incomplete, or incorrect and the director is unable to convince the board to take action. Directors may also consider resigning when they feel their point of view is being disregarded entirely. Public corporations are required to disclose director resignations in an SEC filing, and this disclosure, like others, should be done in consultation with legal advisors.[1]
An earlier edition of the Guidebook stated that:
If, after a thorough discussion, a director disagrees with any significant action proposed to be taken by the board, the director may vote against the proposal and request that the dissent be recorded in the meeting’s minutes. Except in unusual circumstances, taking such a position should not cause a director to consider resigning. However, if a director believes that information being disclosed by the corporation is inadequate, incomplete or incorrect, or that management is not dealing with the directors, the shareholders or the public in good faith, the director should first encourage that corrective action be taken. If that request is not satisfied or the problem continues, the director should encourage the board to replace management and, if such a change does not occur, the director should resign.[2]
In Shocking Technologies, Inc. v. Michael,[3]the court held that:
First, fair debate may be an important aspect of board performance. A board majority may not muzzle a minority board member simply because it does not like what she may be saying. Second, criticism of the conduct of a board majority does not necessarily equate with criticism of the corporation and its mission. The majority may be managing the business and affairs of the corporation, but a dissident board member has significant freedom to challenge the majority’s decisions and to share her concerns with other shareholders. On the other hand, internal disagreement will not generally allow a dissident to release confidential corporate information.
In Wechsler v. Squadron, Ellenoff, Plesent & Sheinfeld, LLP,[4]the court held that:
Can a director of a public corporation who believes that the company is engaged in ongoing securities fraud “blow the whistle” by disclosing to the SEC information protected by the company’s attorney-client privilege, where the company’s Board has not waived the privilege? As a matter of public policy, the Court holds that the answer is yes, although the company could sue the whistle-blowing director for breach of fiduciary duty if such disclosure were not in the company’s best interest.
[1]The Corporate Laws Committee, ABA Section of Business Law, Corporate Director’s Guidebook—Sixth Edition, 66 Bus. Law. 975, 1011–12 (2011).
[2]The Corporate Laws Committee, ABA Section of Business Law, Corporate Director’s Guidebook—Third Edition, 56 Bus. Law. 1571, 1589 (2001).
[3]2012 WL 4482838 (De. Ch. 2012).
[4]994 F. Supp. 202, 204 (S.D.N.Y. 1998).
