DEFINITION of 'Director Rotation'

The cycle by which board members serve and vacate their positions. A policy regarding director rotation, or rotation of directors, may be included in a corporation's corporate governance policy and can specify the term that each member serves as well as the number of board positions that will be up for reelection each year.

BREAKING DOWN 'Director Rotation'

An example of a typical director rotation policy can be one that specifies that one-third of the directors will "retire by rotation" - vacate their positions - leaving them open for new directorship each specified period. The directors that have served the longest will be included in the one-third to retire by rotation. Directors are typically elected at the corporation's annual meeting.

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