Why are boards staggered?

Why is a Staggered Board Important? A staggered board is important to stop a hostile bidder or takeover from gaining control of the business. A hostile bidder needs to wait at least one year, if not longer, to gain control of the board across the classes.

What is a staggered board defense?

A staggered board of directors, also known as a classified board, refers to a board that consists of different classes of directors. In a staggered board of directors, only one class is open to elections each term. It is different from a normal board of directors, where all directors are elected at once.

How do you stagger a board of directors terms?

Probably the most common way of staggering terms is by using three groups and three-year terms. This way, there are never fewer than 2/3 experienced members on the Board. Obviously, this makes no sense for a small Board say, fewer than about 12.

What is the advantage of staggered terms?

Generally, proponents of staggered boards cite two main advantages that staggered boards have over traditionally elected boards: 1) board continuity and 2) anti-takeover provisions—hostile acquirers have a difficult time gaining control of companies with staggered boards.

Which is the best definition of staggered board?

Definition: The Staggered Board is the board comprising of three equal classes of the board of directors who are elected on an annual basis. In other words, the staggered board is the governance practice in which certain members, generally one-third of the total board of directors are elected each year, rather than all at once.

When do staggered boards of directors take place?

The staggering of classes can be done simply to assign staggering service terms, or it may involve more detailed provisions and responsibilities for each class. Elections for the directors of staggered boards occur as terms expire.

What does staggered mean in the Cambridge Dictionary?

I was staggered at the prices. Want to learn more? Improve your vocabulary with English Vocabulary in Use from Cambridge. Learn the words you need to communicate with confidence. Cabinets can be hung at staggered heights.

Why are staggered board terms bad for shareholders?

Opponents of staggered boards argue that they are less accountable to shareholders than annually elected boards. These opponents believe that staggering board terms tend to breed a fraternal atmosphere inside the boardroom that serves to protect the interests of management above those of shareholders.