In staggered elections, not all places in an elected body are up for election at the same time. For example, United States Senators have a six-year term, but they are not all elected at the same time. Rather, elections are held every two years for one-third of Senate seats.
Many companies use staggered elections as a tool to prevent takeover attempts. Some legislative bodies (most commonly upper houses) use staggered elections, as do some public bodies, such as the Securities and Exchange Commission.
Application in business
A staggered board of directors or classified board is a prominent practice in US corporate law governing the board of directors of a company, corporation, or other organization, in which only a fraction (often one third) of the members of the board of directors is elected each time instead of en masse (where all directors have one-year terms). Each group of directors falls within a specified "class"—e.g., Class I, Class II, etc.—hence the use of the term "classified" board.
In publicly held companies, staggered boards have the effect of making hostile takeover attempts more difficult. When a board is staggered, hostile bidders must win more than one proxy fight at successive shareholder meetings in order to exercise control of the target firm. Particularly in combination with a poison pill, a staggered board that cannot be dismantled or evaded is one of the most potent takeover defenses available to U.S. companies.
In corporate cumulative voting systems, staggering has two basic effects: it makes it more difficult for minorities to elect directors, as the fewer directorships up for election requires a larger per cent of the equity to win; and it makes takeover attempts less likely to succeed as it is harder to vote in a majority of new directors. Staggering may also however serve a more beneficial purpose, that is provide "institutional memory" — continuity in the board of directors — which may be significant for corporations with long-range projects and plans.
Institutional shareholders are increasingly calling for an end to staggered boards of directors—also called "declassifying" the boards. The Wall Street Journal reported in January 2007 that 2006 marked a key switch in the trend toward declassification or annual votes on all directors: more than half (55%) of the S&P 500 companies have declassified boards, compared with 47% in 2005.
Legislative bodies which use staggered elections
- Chamber of Deputies of Argentina
- Senate of Argentina
- Senate of Australia
- Senate of Brazil
- Senate of the Czech Republic
- Senate of France
- House of Councillors of Japan
- Senate of Pakistan
- Senate of the Philippines
- United States Senate
Three of Australia's five State Legislative Councils use staggered elections:
- New South Wales Legislative Council
- South Australian Legislative Council
- Tasmanian Legislative Council
27 of the State Senates in the United States have staggered elections:
- Alaska State Senate
- Arkansas State Senate
- California State Senate
- Colorado State Senate
- Delaware State Senate
- Florida State Senate
- Hawaii State Senate
- Illinois State Senate
- Indiana State Senate
- Iowa Senate
- Kentucky State Senate
- Missouri State Senate
- Montana State Senate
- Nebraska State Senate
- Nevada State Senate
- North Dakota State Senate
- Ohio State Senate
- Oklahoma State Senate
- Oregon State Senate
- Pennsylvania State Senate
- Tennessee State Senate
- Texas State Senate
- Utah State Senate
- Washington State Senate
- West Virginia State Senate
- Wisconsin State Senate
- Wyoming State Senate
- Some local councils in the United Kingdom
- See Faleye,O., 2007, Classified Boards, Firm value, and Managerial Entrenchment, Journal of Financial Economics83, 501-529.
- See Lucian Bebchuk, John C. Coates IV, and Guhan Subramanian, The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, 54 Stan. L. Rev. 887 (2002).
- Hillier, David; Ross, Stephen; Westerfield, Randolph; Jaffe, Jeffrey; Jordan, Bradford (2013). Corporate Finance (2nd European ed.). Berkshire: McGraw-Hill Education. pp. 34–35. ISBN 9780077139148.
- Jared A. Favole, "Big Firms Increasingly Declassify Boards", The Wall Street Journal, Jan. 10, 2007.
- "Local Government Elections", Western Australian Electoral Commission.
- "Length of terms of state senators", Ballotpedia, Accessed 24 August 2016.
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