STAGGERED BOARD OF DIRECTORS Meaning and
Definition
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A staggered board of directors refers to a governance structure commonly adopted by corporations where the terms of the board members are divided into multiple classes with different expiration dates. Instead of having all board members elected or re-elected at the same time, a staggered board system ensures that only a portion of the directors are up for re-election during any given year.
In this setup, the board is typically divided into three classes, each serving a three-year term. This means that one-third of the board seats are up for election or re-election each year. The classification of directors into different terms creates an overlapping arrangement that provides continuity and stability to the organization.
The purpose of implementing a staggered board is to safeguard against abrupt management turnovers and sudden external influences, as well as to encourage long-term strategic planning by maintaining a consistent leadership base. It often helps companies to resist hostile takeover attempts, as acquiring a majority stake in the company does not guarantee control over the board.
While staggered boards are intended to foster stability, they can also prevent swift changes in corporate direction when necessary, resulting in potential conflicts between shareholders and management. Opinions on the effectiveness of staggered boards vary, with proponents emphasizing their benefits in terms of long-term planning and protection against hostile takeovers, while critics argue that they may diminish accountability and impede shareholder rights.
Overall, a staggered board of directors allows for a more gradual transition of board seats, enabling sustained leadership and strategic continuity within a corporation.
Common Misspellings for STAGGERED BOARD OF DIRECTORS
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