Staggered elections

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Staggered elections are elections where only some of the 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.

The three classes of United States Senators are made up of 33 or 34 Senate seats each. The purpose of the classes is to determine which Senate seats will be up for election in a given year. The three groups are staggered such that senators in only one of the classes are up for election in any two year cycle, rather than having all 100 seats up for election at once. Thus, the 33 Senate seats of class 1 were up for election in 2018, the elections for the 33 seats of class 2 will take place in 2020, and the elections for the 34 seats of class 3 will be held in 2022.

Contents

Staggered elections have the effect of limiting control of a representative body by the body being represented, but can also minimize the impact of cumulative voting. [1] 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.

Cumulative voting is a multiple-winner voting method intended to promote more proportional representation than winner-take-all elections.

In business, a takeover is the purchase of one company by another. In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.

An upper house is one of two chambers of a bicameral legislature, the other chamber being the lower house. The house formally designated as the upper house is usually smaller and often has more restricted power than the lower house. Examples of upper houses in countries include the Australian Senate, Brazil's Senado Federal, the Canadian Senate, France's Sénat, Germany's Bundesrat, India's Rajya Sabha, Ireland's Seanad, Malaysia's Dewan Negara, Myanmar's Amyotha Hluttaw, the Netherlands' Eerste Kamer, Pakistan's Senate of Pakistan, Russia's Federation Council, Switzerland's Council of States, United Kingdom's House of Lords and the United States Senate.

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. [2]

Board of directors board composed of directors

A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Such a board's powers, duties, and responsibilities are determined by government regulations and the organization's own constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet.

A company, abbreviated as co., is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise. Company members share a common purpose, and unite to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals. Companies take various forms, such as:

Corporation Separate legal entity that has been incorporated through a legislative or registration process established through legislation

A corporation is an organization, usually a group of people or a company, authorized by the state to act as a single entity and recognized as such in law for certain purposes. Early incorporated entities were established by charter. Most jurisdictions now allow the creation of new corporations through registration.

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. [3]

A proxy fight, proxy contest or proxy battle, sometimes also called a proxy war, is an unfriendly contest for the control over an organization. The event usually occurs when corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes to install new management for any of a variety of reasons. Shareholders of a public corporation may appoint an agent to attend shareholder meetings and vote on their behalf. That agent is the shareholder's proxy.

A shareholder rights plan, colloquially known as a "poison pill", is a type of defensive tactic used by a corporation's board of directors against a takeover. Typically, such a plan gives shareholders the right to buy more shares at a discount if one shareholder buys a certain percentage or more of the company's shares. The plan could be triggered, for instance, if any one shareholder buys 20% of the company's shares, at which point every shareholder will have the right to buy a new issue of shares at a discount. If every other shareholder is able to buy more shares at a discount, such purchases would dilute the bidder's interest, and the cost of the bid would rise substantially. Knowing that such a plan could be activated, the bidder could be disinclined to take over the corporation without the board's approval, and would first negotiate with the board in order to revoke the plan.

In corporate cumulative voting systems, staggering has two basic effects: it makes it more difficult for a minority group to get directors elected, as the fewer directorships up for election requires a larger percent 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. [4] 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. [4]

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. [5]

Legislative bodies which use staggered elections

National

State

Argentina

12 of the 24 provincial legislatures have staggered elections:

Australia

Three of Australia's five State Legislative Councils use staggered elections:

Local councils in Western Australia also have staggered elections. [6]

United States

27 of the State Senates in the United States have staggered elections: [7]

Local

Historical usage

National

Local

See also

Notes

  1. http://www.stroock.com/SiteFiles/Pub341.pdf
  2. See Faleye,O., 2007, Classified Boards, Firm value, and Managerial Entrenchment, Journal of Financial Economics83, 501-529.
  3. 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).
  4. 1 2 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.
  5. Jared A. Favole, "Big Firms Increasingly Declassify Boards", The Wall Street Journal, Jan. 10, 2007.
  6. "Local Government Elections", Western Australian Electoral Commission .
  7. "Length of terms of state senators", Ballotpedia, Accessed 24 August 2016.
  8. 1 2 Consell General - L'abstenció al Principat d'Andorra
  9. Direction des élections - Evolution de la législation électorale
  10. Danmarks Statistik - Rigsdagsvalgene og folkeafstemningerne i april og maj 1953, p. 182
  11. "Negentiende-eeuws districtenstelsel in Nederland". Parlement.com (in Dutch). Retrieved 18 February 2019.
  12. "Geschiedenis kiesstelsel Eerste Kamer". Parlement.com (in Dutch). Retrieved 18 February 2019.
  13. Akio Kamiko (2010, bilingual): 近代地方行政の黎明期(1868-1880年), pp. 7–8: 府県会規則 /The Start of Modern Local Government (1868 – 1880), pp. 10–11: Prefectural Assembly Law (Fukenkai Kisoku)

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