Annual Elections by Market Cap

Published by

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.

NACD is able to provide custom information on election methods and dozens of other governance issues through our Custom Benchmarking Report. Click here to learn more.

Comments are closed here.