It doesn't, for example against the Richdrake boss on my first character I was wearing full dire armor on a tenacity build and he was hitting me just as hard as he was hitting my boyfriend using a full damage build and using the Soft set instead, he had 2 less defense then me, and 0 tenacity versus my 22 tenacity, dragon hit me for the exact same amount of damage. IT's just not a good stat, or not working. Going full DPS really makes the game easy, I couldn't beat the dragon on normal difficulty using a tenacity build with dire armor at level 20, I came back on hard difficulty and beat him at level 14 in soft armor with 1 tenacity, lol. An absolute steamroll.
I've ran some tests and tenacity does seem to be working as intended. This was the result in a full set of Dire against the 2nd boss.
Hard Mode
| Tenacity | Min Damage | Max Damage |
| 22 | 11 | 20 |
| 0 | 31 | 40 |
Normal Mode
| Tenacity | Min Damage | Max Damage |
| 22 | 9 | 16 |
| 0 | 24 | 31 |
If possible, could you provide details on your playthrough and anything you might have done to your stats. Just to rule out the possibility that you encountered an obscure bug that could have potentially led to tenacity not working.