Classified Board

AAA

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.

RELATED TERMS
  1. Anti-Takeover Measure

    Measures taken on a continual or sporadic basis by a firm's management ...
  2. Corporate Governance

    The system of rules, practices and processes by which a company ...
  3. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  4. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  5. Outside Director

    Any member of a company's board of directors who is not an employee ...
  6. Stagger System

    A method of electing a company's board of directors that puts ...
Related Articles
  1. The Basics Of Corporate Structure
    Investing Basics

    The Basics Of Corporate Structure

  2. Governance Pays
    Options & Futures

    Governance Pays

  3. Putting Management Under The Microscope
    Options & Futures

    Putting Management Under The Microscope

  4. What is a staggered board?
    Investing

    What is a staggered board?

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center