declassification

Declassification is a corporate governance term, referring to a board of directors in which all directors stand for reelection in the same year. This is in comparison to a classified board, in which directors serve "staggered" terms, is one in which only some directors are up for reelection in any given year. Staggered boards allegedly reduce a firm's value and in the context of hostile takeovers, can operate as a takeover defense, which entrenches management, discourages potential acquirers, and delivers a lower return to shareholders. In contrast, declassified boards raise a board's level of accountability because declassification allows shareholders to respond more quickly (with their votes) if a current board of directors' decisions and actions do not appear favorable to shareholders' interests. Perhaps for this reason, the boards of publicly held corporations are becoming increasingly declassified.