Declassified Board
A board structure where all directors stand for shareholder election every year.
What is Declassified Board?
A declassified board (also called a unitary board) is one in which all directors stand for election by shareholders at each annual meeting, rather than serving staggered multi-year terms under a classified board structure. Annual director elections increase board accountability because shareholders can replace any director at any AGM. Declassification removes the anti-takeover protection of a classified board and is generally considered a shareholder-friendly governance practice. Major institutional investors and proxy advisors such as ISS and Glass Lewis typically support shareholder proposals to declassify boards. The proportion of S&P 500 companies with declassified boards has grown significantly since the early 2000s.
Example
Following sustained pressure from institutional investors and proxy advisors, ExxonMobil declassified its board in 2012, transitioning from staggered three-year terms to annual director elections for all board members. This change reduced the board's protection against activist shareholders, a factor later relevant in Engine No. 1's successful 2021 board campaign.