Classified Board

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Classified Board

Also known as Staggered Board: is one in which the directors are placed into different classes and serve overlapping terms. Since only part of the board can be replaced each year, an outsider who gains control of a corporation may have to wait a few years before being able to gain control of the board. This slow replacement makes a classified board an effective delays of takeovers. Sometimes known as a delay provision.

Classified Board

A board of directors where members start their terms at different times and only a certain number are elected in a given year. For example, a board of directors may have 10 members serving five-year, staggered terms where two new members are elected each year. In addition to giving the board consistency in its membership, a classified board makes hostile takeovers more difficult because the potential acquirer can replace only so many directors at a time.

classified board

A corporate board of directors whose members are elected to terms that expire in different years. A classified board makes it more difficult for a new owner to assume control in a takeover. See also staggered terms.
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Unfortunately, we continue to see a few companies with classified boards, little diversity, questionable independence, and even holding back as it relates to more performance- based compensation.
The fund has identified several corporate-governance failures, such as ignoring majority-approved shareholder proposals, and having a non-independent chairman or classified boards and a poison-pill mechanism.
C, a leading source for investors and corporations of impartial information on corporate governance and social responsibility issues, has announced that it will provide a Web-based "Scorecard" on three key proxy issues this season: global warming, CEO compensation ("golden parachutes") and classified boards.
6) Unlike studies concerning shareholder-rights plans, (7) there is no empirical evidence that classified boards provide tangible economic benefit to shareholders.
During the 2010-11 proxy season, the SBA, with the assistance of the ACGI, submitted shareholder proposals to repeal the classified boards of a number of companies for a vote at their 2011 annual meetings.
Classified boards are an important protection from shareholder activism and hostile takeovers that are especially relevant given the relative scale of the majority of tech companies going public.
During the 2010-11 proxy season the Foundation, with the assistance of the ACGI, submitted shareholder proposals to repeal the classified boards of a number of companies for a vote at their 2011 annual meetings.
In classified boards, members are divided into classes with directors in each class serving staggered terms (typically three years) so that only one class stands for election each year.
For example, from 1999 to 2009, the percentage of S&P 500 companies with classified boards has dropped from 60.
Classified boards such as Spartan's are an outdated governance practice that serves to protect entrenched boards and prevent shareholders from holding accountable the directors charged with safe-guarding their investments in the company.
Additionally, to comply with certain New York Stock Exchange requirements relating to classified boards, the Board of Directors has agreed that an Officer of the Fund will stand for election as a Director at the Fund's next annual stockholder meeting currently scheduled to be held in May 2009.
As a result of continued shareholder pressure, the number of companies with "poison pills" and/or classified boards continues to decrease.

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