Audit committees at companies with a staggered board structure are not responsive to low shareholder approval, making them less effective than their counterparts at firms that do not stagger board elections, according to a new study.

In staggered (or classified) votes, only a third of board seats are typically up for election each year, with members being elected for three-year terms. The practice has become less popular in recent years amid criticism that it encourages management entrenchment to the detriment of shareholders’ interests.

A paper published in the journal Auditing may add fuel to the critics’ fire, finding that the adverse effects of a staggered board may extend to the board audit committee.

While non-staggered committees, the study says, respond to shareholder disapproval by improving the composition of committees, increasing the frequency of meetings, and enhancing the quality of financial reporting, staggered panels do not.

“Our results extend … evidence that staggered boards are less likely to react to low shareholder votes,” the paper’s authors, Ronen Gal-Or and Udi Hoitash of Northeastern University and Rani Hoitash of Bentley University, said in a news release. “This extension matters because the key difference between staggered and non-staggered boards is the ability of shareholders to promptly hold directors accountable through voting.”

The Sarbanes-Oxley Act of 2002 and other legislation have increased the watchdog responsibilities of audit committees. To assess the effectiveness of these committees, the study’s researchers analyzed more than 18,000 board elections over a seven-year period and other data on director characteristics and committee memberships.

The results showed, among other things, that low shareholder approval is associated with an average increase in audit-committee meetings from 8.35 a year to 12.05. “Staggered directors that have lower incentive to appease shareholders will be less likely to increase meetings,” the study said.

In addition, low approval of boards at non-staggered companies was found to lead in the two years post-election to a significant drop in non-cash accounting items that typically entail some element of guesswork and are often associated with earnings manipulation.

Non-staggered audit committees may “respond to low votes by working with management to increase the accuracy of the financial reports,” the paper suggests.

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