Figure 2 shows that staggered boards
are well represented across companies of varying sizes.
make it very difficult to acquire a company without the explicit approval of the CEO and the board.
1301, 1376 (2001) (finding that percentage of IPO firms with staggered boards
rose from 34% in early 1990s to 82% in 1999); Daines& Klausner, supra note 18, at 96 tbl.
The difficulty of doing so makes staggered boards
a strong takeover defense that can serve to entrench incumbent management.
companies that have staggered boards
in place could do so, they will not.
It is unfortunate it took this long for management and the Board to realize that entrenchment devices like staggered boards
do not serve the interests of shareholders.
Icahn further noted, "In addition, the Motorola Board has also taken an important step forward for corporate governance in that the separated company which includes Mobile Devices will be essentially free from poison pills and staggered boards
, both of which, in my opinion, serve to make democracy a travesty in corporate America.
As a deterrent to takeover bids, companies with staggered boards
, "tend to reduce shareholder returns for targetsOon the order of 8 percent to 10 percent in the nine months after a hostile bid was announced," according to the Glass Lewis analysis.
These practices include golden parachutes, multiyear guaranteed contracts, overgenerous severance arrangements, golden coffins, poison pills, staggered boards
, and gross ups.
We believe staggered boards
reduce board member accountability and breed complacency by allowing directors to serve for extended terms without giving shareholders the opportunity to vote for change.
This logic is thought to apply with equal force to companies with staggered boards
(6) because if a raider were to succeed in removing one-third of the directors and replacing them with directors friendly to the raider, the remaining directors would be expected to fold rather than continue to hold out against the expressed preference of the stockholders whose interests the directors are supposed to represent.
Having been largely successful in the effort to eliminate plurality voting among large cap companies, the same institutional forces are leading shareholder groups increasingly to oppose staggered boards