The benefits of staggered board meetings

The concept of the staggered board of directors (called "staggered board") comes from the American corporate law of the beginning and middle of the last century. At that time, given the shareholder democratization of large American companies, many of them were targeted by corporate raiders, who were financiers who acquired companies hostilely (without the consent of management) in order to change their management policies or to resell them. Staggered boards were one of the mechanisms used by the management of such companies to repel the aforementioned corporate raiders.

Boards of Directors are considered "staggered" when their members, for whatever reason, are elected to serve different terms. In this sense, for example, there may be Board members elected to serve 1-year terms, while others serve 5-year terms and others serve 10-year terms. This mechanism, in the example cited above, served as a disincentive for the hostile investor because, after acquiring control, he had to wait for the terms for which the members were elected to be fulfilled, thus not being able to exercise real control of the company.

In Colombia, given the concentration of share ownership in the issuers of securities and the low market capitalization in the markets, the issue of hostile takeovers and the actions of the boards of directors in this respect have not been a priority. However, the concept of staggered boards of directors has gained great importance, since the entry into force of Law 1258 of 2008 (law that creates the Simplified Joint Stock Companies -S.A.S.S.-), for family businesses, since in these companies it is legitimate to use special statutory provisions so that certain family members can remain indefinitely as directors of the companies.

In this sense, for example, it can be agreed that the bylaws of an S.A.S. indicate that the parents of the family will be members for life of the Board of Directors, while the other members will be voted each year for their respective election.

Or that, for example, while the Board of Directors positions of the external members are for 3 years, those of the family members are for one year, in order to comply with a family protocol.

This is one of the great advances of the S.A.S., because while in the S.A. the main and alternate members of the board were necessarily elected "for specific periods and by electoral quotient" (art. 436 of the C. de Co.), in the S.A.S. the rules of operation of the Board of Directors and the systems of appointment of its members can be freely agreed by the shareholders (art. 25 L. 1258/2008).