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.
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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.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.