Staggered Board of Directors

Staggered Board of Directors

A staggered board of directors occurs when a corporation elects its directors a few at a time, with different groups of directors having overlapping multi-year terms, instead of en masse, with all directors having one-year terms. Each group of directors is put in a specified "class," e.g., Class I, Class II, etc., hence staggered boards are also known as "classified boards."

In publicly held companies, staggered boards have the effect of making hostile takeover attempts more difficult. When a board is staggered, hostile bidders must win more than one proxy fight at successive shareholder meetings in order to exercise control of the target firm. Particularly in combination with a poison pill, a staggered board that cannot be dismantled or evaded is one of the most potent takeover defenses available to U.S. companies. See Lucian Bebchuk, John C. Coates IV, and Guhan Subramanian, The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, 54 Stan. L. Rev. 887 (2002).

Institutional shareholders are increasingly calling for an end to staggered boards of directors -- also called "declassifying" the boards. The Wall Street Journal reported in January of 2007 that 2006 marked a key switch in the trend toward declassification or annual votes on all directors: more than half (55%) of the S&P 500 companies have declassified boards, compared with 47% in 2005. (Jared A. Favole, "Big Firms Increasingly Declassify Boards", The Wall Street Journal, Jan. 10, 2007.)

Staggered boards can provide leadership security and continuity. Similar staggering of terms are used for that reason in the election of U.S. Senators, members of the Securities and Exchange Commission, and other public bodies. By design, they have the effect of limiting control of a representative body (a board of directors, the Senate, the SEC, etc.) by the body being represented (shareholders, voters, the President).

ee also

* Economics
* Mergers and Acquisitions
* Microeconomics
* Takeover
* Industrial organization


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Look at other dictionaries:

  • staggered board of directors — USA staggered board of directors, Also known as a classified board of directors. A board which is comprised of directors that have different overlapping, multi year terms so that not all of the directors terms expire in the same year. A staggered …   Law dictionary

  • Staggered board of directors — совет директоров, избираемый по частям. Такой порядок избрания совета директоров является средством борьбы с враждебным поглощением, не позволяющим единовременно захватить контроль над компанией. См. также: Советы директоров акционерных обществ… …   Финансовый словарь

  • Staggered board of directors — A staggered board of directors or classified board is a prominent practice in US corporate law governing the board of directors of a company, corporation, or other organization in which only a fraction (often one third) of the members of the… …   Wikipedia

  • staggered board of directors — noun a board of directors a portion of whose members are elected each year instead of all members being elected annually • Hypernyms: ↑directorate, ↑board of directors …   Useful english dictionary

  • staggered board of directors — Occurs when a portion of directors are elected periodically, instead of all at once. Board terms are often staggered in order to thwart unfriendly takeover attempts, since potential acquirers would have to wait longer before they could take… …   Financial and business terms

  • STAGGERED BOARD OF DIRECTORS — совет директоров компании, в котором только часть директоров переизбирается каждый год (а не все одновременно). Часто подобная система используется для того, чтобы предотвращать недружественные попытки поглощения (takeover), поскольку… …   Финансово-инвестиционный толковый словарь

  • board of directors — noun a group of persons chosen to govern the affairs of a corporation or other large institution (Freq. 3) • Syn: ↑directorate • Hypernyms: ↑board • Hyponyms: ↑staggered board of directors • …   Useful english dictionary

  • classified board of directors — USA staggered board of directors, Also known as a classified board of directors. A board which is comprised of directors that have different overlapping, multi year terms so that not all of the directors terms expire in the same year. A staggered …   Law dictionary

  • Staggered Board — A staggered board consists of a board of directors whose members are grouped into classes; for example, Class 1, Class 2, Class 3, etc. Each class represents a certain percentage of the total number of board positions. For example, a class is… …   Investment dictionary

  • staggered board — A corporation s board of directors in which a fraction of the board is elected each year. In staggered boards, members serve two or three years, depending on whether the board is classified into two or three groups …   Black's law dictionary

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