Annual Elections by Market Cap
An article featured in Tuesday’s edition of NACD Directors Daily focused on a proposal submitted to Smithfield Foods, Inc. for a switch from a “staggered three-year term to annual elections for board members.” Annual elections for directors are commonplace among companies ofSmithfield’s size and industry. For mid-cap companies ($2 billion to $10 billion) in the food, beverage, and tobacco industry group, such asSmithfield, the majority (58.3%) have annual elections. For mid-cap companies in general, regardless of industry, the statistics are nearly evenly split between classified boards (51.1%) and annually elected boards (48.9%).
Director election methods are closely related to company size. Those organizations with smaller market capitalization tend to have classified boards (also known as “staggered”—the practice in which a portion of directors serve for different term lengths), while those with larger market caps are increasingly more likely to have annual elections. Two-thirds of nano-cap companies (less than $50 million) have classified boards while a slight majority of micro-cap, small-cap, and mid-cap companies also stagger their elections (55.2%, 53.4%, and 51.1%, respectively).
The statistics change rather dramatically for large- and mega-cap companies. Over two-thirds of companies with a market cap of between $10 billion and $200 billion have annual elections. Almost all of the very largest of companies, those with a market cap over $200 billion, have annual elections.
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