Classified Board

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DEFINITION of 'Classified Board'

A structure for a board of directors in which a portion of the directors serve for different term lengths, depending on their particular classification. Under a classified system, directors serve terms usually lasting between one and eight years; longer terms are often awarded to more senior board positions (i.e. chairman of the corporate governance committee).

Classified boards are often referred to as "staggered boards", although staggered boards and classified boards have somewhat different structures. Staggered boards need not be classified, but classified boards are inherently staggered.

INVESTOPEDIA EXPLAINS 'Classified Board'

The classified board structure features continuity of direction and preservation of skill, but has come under harsh criticism from shareholder advocacy groups for a number of reasons. Opponents to the classified structure argue that the system breeds board member complacency and forces directors to develop close relations with management.

Classified boards also serve as a powerful anti-takeover measure.

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RELATED FAQS
  1. What is a staggered board?

    A staggered board of directors (also known as a classified board) is a board that is made up of different classes of directors. ...
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