Classified Board

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  2. Interlocking Directorates

    A common business practice where a member of a company's board ...
  3. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  4. Dummy Director

    A person on a company's board of directors who votes and acts ...
  5. Corporate Resolution

    A written statement made by the board of directors detailing ...
  6. Outside Director

    Any member of a company's board of directors who is not an employee ...
Related Articles
  1. Fundamental Analysis

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  2. Executive Compensation

    Retired Execs: How Much Do Corporate Boards Pay?

    If you have the right skill set, getting a seat on a company board can be a lucrative and stimulating way to spend some of your new free time.
  3. Financial Advisors

    Fund Boards: What They Do and Why You Should Care

    Fund boards oversee management and operations of the fund on behalf of shareholders. Make sure you've got a board that will look out for you.
  4. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  5. Professionals

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  6. Professionals

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  7. Investing News

    Large Chipotle Shareholders Get More Control (CMG)

    Chipotle shareholders voted on Wednesday to allow large, long-term shareholders more control over the board of directors. All board members were re-elected.
  8. Investing

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...
  9. Investing News

    Chipotle's Board Members Survived E.coli, For Now (CMG)

    Chipotle investors owning a certain number of shares can now hold board member's feet to the fire or nominate their own board candidates.
  10. Personal Finance

    Why Do Corporate Boards Lack Women?

    Sheryl Sandberg, COO of Facebook, serves on many corporate boards. Why aren't there more women on corporate boards, and why was Facebook known as a "boy's club" for many years?
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. ... Read Answer >>
  2. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Answer >>
  3. What is the difference between a president and a chief executive officer? Can there ...

    In general, the chief executive officer (CEO) is thought of as the highest ranking officer in a company while the president ... Read Answer >>
  4. 12b-1 fees in mutual funds, are known as “asset-based distribution charges,” ... ...

    The correct answer is b. To initiate 12b-1 fee charges in a mutual fund, there must be a majority vote by the full board ... Read Answer >>
  5. How do marketable securities impact a company's financial statements?

    Understand how the various components of the financial statements are impacted by investments in marketable securities owned ... Read Answer >>
  6. How are members of the Cost Accounting Standards Board chosen?

    Read about the political appointments to the Cost Accounting Standards Board, which makes, promulgates and amends cost accounting ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center