Classified Board
A board structure where directors serve staggered multi-year terms, preventing full board replacement in one vote.
What is Classified Board?
A classified board (also called a staggered board) divides directors into two or three classes where only one class stands for election at each annual meeting. This means that replacing the entire board requires two or more consecutive shareholder elections. Classified boards are a common anti-takeover defense: a hostile acquirer cannot gain board control in a single vote even after acquiring a majority of shares. Institutional investors and proxy advisors typically oppose classified boards on governance grounds, arguing they reduce accountability. Many S&P 500 companies have declassified their boards in response to shareholder pressure over the past two decades.
Example
Alphabet (Google) maintained a classified board structure for years following its 2004 IPO, with directors grouped into three classes serving three-year terms. This, combined with its dual-class share structure, gave founders significant protection from activist shareholders seeking rapid board change.