Conflicts of Interest (Part Four - Resignation)
When is resignation the only option?
This is the hardest conversation, and it probably happens less often than it should.
There are situations where a conflict is so fundamental, so pervasive, or so irresolvable that a director cannot perform their duties without being compromised at every turn. Disclosure and recusal are bandaids. They don't work when the conflict is a permanent condition rather than a one-off problem.
The structural conflict
A director whose primary employer is a significant competitor of the company on whose board they sit may find that almost every strategic discussion presents a conflict. They cannot hear the company's strategy without breaching a duty to one party or the other. Disclosure and recusal on a case-by-case basis doesn't solve a structural problem.
The reputational conflict
Sometimes the mere association of a director with an entity creates a conflict that, even if legally manageable, makes the director's continued service untenable in the eyes of shareholders, regulators, or the public. The test here isn't whether the director can comply with the rules. It's whether their presence on the board serves the company's interests.
The integrity conflict
If a director discovers that other board members, or management, have engaged in conduct that the director finds ethically unacceptable — and the board declines to act — the director's only remaining option may be to resign. Staying in the room confers implicit endorsement. It also creates personal liability risk.
A recent real-world example
Atanu Chakraborty, former Chairman of India's largest private lender HDFC Bank, abruptly resigned on 18 March 2026, citing incongruence between "certain happenings and practices within the bank" and his "personal values and ethics." An internal probe at HDFC had revealed that the bank negotiated higher interest rates for a government corporation than the interest rate that the bank was legally authorised to offer its customers. The bank disguised the difference in interest payments to the government entity as marketing expenses. Chakraborty chose to resign rather than remain.
The practical reality
Resignation is a significant step, and it should be approached as such. Directors should not resign at the first sign of disagreement or discomfort — that would make boards ungovernable. Friction can often be a positive indicator of a board's thoughtful deliberation and consideration of opposing views. But directors should not stay in the face of an irresolvable conflict of interest simply because it's uncomfortable to leave.
Read our previous articles in this series:
