To Stagger or Not to Stagger Your Board of Directors, That is the Question

One question faced by companies from startup through Fortune 500 status is whether they should stagger or classify their board of directors.  Staggering or classifying occurs when the corporation sets up voting for election of only a minority of members of the board every year, so it often takes several years to replace an entire board.  This is viewed as a good takeover defense and also argued to be good for the corporation because frequent changes of directors can result in corporate policy and corporate governance changing more often or more dramatically. Those against it feel that it doesn’t give shareholders the ability to make major changes when problems arise with the current board’s decisions and it entrenches existing corporate policy and management to not as easily allow for necessary change.  Although some would downplay trying to make this about shareholder rights versus management or existing structure, that is a major factor of the argument.

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