When Company Directors Get “Ready to Rumble:” What Fellow Directors Need to Know

Published by Chipman Glasser on May 29, 2025

Director disputes are not uncommon in the business world and can arise in companies of any size—from a closely-held family business to a publicly-traded corporation. These disputes frequently stem from disagreements over strategic direction, personality clashes, or matters of corporate governance. If left unresolved, disputes among the directors can hinder an organization’s ability to function effectively, damage its reputation, or even lead to costly litigation.

Understanding how to navigate these disputes is crucial for the health of the company and the wellbeing of its leadership team. Here, we will address the common issues that trigger director disputes, what happens when things can’t be resolved, and strategies to avoid and manage these conflicts.

What are Common Issues Leading to Director Disputes?

• Differing Vision for the Company: One of the most frequent causes of director disputes is differing visions for the company’s future. Directors may have contrasting views on the direction of the business, the products or services to prioritize, or the type of corporate culture to foster. For instance, one director might advocate for aggressive expansion, while another believes that the company should focus on stabilizing and improving current operations.
• Financial Disagreements: Financial matters are another frequent cause of fall out. Disagreements over budgeting, spending, investment strategies, or the distribution of profits can quickly escalate into a full-blown dispute. A lack of transparency in financial reporting or concerns over mismanagement can further fuel tensions among directors.
• Governance and Decision-Making Processes: Directors may clash over the governance structures and decision-making processes of the company. Some may argue for a more centralized decision-making structure, while others might prefer decentralization and empowering individual departments or teams. Additionally, disagreements can arise over board composition, shareholder rights, or the process for making major strategic decisions.
• Personal Issues and Personality Clashes: Personal conflicts between directors—often fueled by differences in communication styles or personalities—are sometimes the most difficult to resolve. These clashes can negatively impact decision-making, collaboration, and the overall functioning of the board.

What Happens When Director Disputes Can’t Be Resolved?

While it’s always ideal to resolve disputes amicably, sometimes that is impossible. When director disputes escalate and can’t be resolved internally, several things can happen, depending on the nature and severity of the disagreement.

If a dispute becomes public, it may erode trust among investors, customers, and employees.

1. Loss of Focus and Decline in Productivity: Unresolved disputes can lead to a significant loss of focus for the organization. Directors may become more preoccupied with internal conflicts than with the strategic objectives of the business. This can trickle down to the management team and employees, leading to reduced productivity, low morale, and a lack of direction.
2. Damage to Company Reputation: Publicized director disputes can severely damage the company’s reputation. If a dispute becomes public, it may erode trust among investors, customers, and employees. Shareholders may lose confidence in the leadership, and customers may feel uncertain about the company’s stability.
3. Resignations and Departures: When conflicts remain unresolved, directors may choose to resign from their positions, either voluntarily or under pressure. This can lead to a loss of institutional knowledge and continuity within the board. Additionally, senior executives may leave as a result of the toxic environment, which can further destabilize the company.
4. Legal Consequences: In extreme cases, unresolved director disputes can result in legal action. Directors may seek to remove each other from the board through shareholder votes, or they may initiate legal proceedings against one another if they believe there have been breaches of fiduciary duty, fraud, or misconduct. Litigation can be costly, time-consuming, and damaging to the company’s reputation.

What are the Best Practices to Resolve Director Disputes?

1. Open Communication and Mediation: The first step in resolving a director dispute should always be open and honest communication. Directors should attempt to understand each other’s perspectives and work toward finding common ground. In many cases, a neutral third party, such as a mediator or arbitrator, can help facilitate discussions and help the parties involved reach a compromise.
2. Review of Governance Documents: Most organizations have governance documents, such as a shareholder agreement, board charter, or bylaws, that outline how disputes should be resolved. These documents often specify mechanisms for dispute resolution, such as formal voting procedures or requirements for seeking external arbitration. Reviewing these documents can provide a structured framework for addressing conflicts.
3. Involve a Professional Facilitator: Facilitators can help the board focus on the issues at hand and avoid personal attacks. Professional mediators and governance consultants can also assist in creating clear processes for conflict resolution and help foster a collaborative environment.

While disagreements among board members are natural, they can have serious consequences if not addressed promptly and effectively.

4. Consider Board Reorganization Reorganization: If personalities or governance issues are at the heart of the dispute, it may be worth considering a reorganization of the board. This could include adjusting the size of the board, changing the leadership structure, or adding new independent directors. Sometimes, bringing in fresh perspectives can help break the deadlock.
5. Seek Legal Counsel: In cases where the dispute threatens the legal health of the company or may involve breaches of fiduciary duty, it’s important to seek legal counsel. An experienced attorney specializing in corporate law can provide advice on the legal options available and help guide the board through potential litigation or regulatory issues.

Conclusion

Director disputes are an unfortunate but often unavoidable aspect of running a corporation. While disagreements among board members are natural, they can have serious consequences if not addressed promptly and effectively. Understanding the common causes of disputes, knowing what can happen when things are not resolved, and implementing best practices for conflict resolution can help maintain a healthy board dynamic and prevent unnecessary harm to the organization. Boards that can effectively manage conflict and maintain unity are better positioned to lead their organizations toward success.

If you’re currently dealing with or preparing for potential board conflicts, our team of experienced business litigators can help.