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Tucked away in the pages of a Wall Street Journal (WSJ) is an article describing how WCI Communities, Pepco Holdings, and Duke Energy Corporation are following a growing trend to “declassify” company boards of directors “an move that ends staggered elections of directors in favor of annual ones” (Murti, 06/08/05, p. B2B). Other firms declassifying boards include: BKF (BKF Capital group Adopts Corporate Governance Changes, 06/08/05), Allegheny Energy, Inc. (SEC Filings, 06/15/05), Wisconsin Energy Corporation (PRNewswire-FirstCall, 05/05/05), Honeywell (Honeywell shareholders OK changes, 04/26/05), and Kohl’s (Hajewski, 04/27/05) to name only a few of the firms. Supplementing the issue of declassification, is the issue of shareholders voting. Here, proposals are seeking a change from a super majority requirement to a simple majority approval for all matters submitted for stockholder approval (SEC, 06/15/05). The expressed desire is the ability of shareholder (and large fund managers) to affect change in the companies owned. Yet, these votes may be non-binding upon the Boards. Additionally, declassification is sought for a more subtle issue and that is the “poison pills” quality associated with monolithic board membership, which hinders possible corporate acquisition and merger activities (Deane, 2005). Some believe that Board members are currently positioned to exercise poor judgment due to a conflict of interest when the loss of the member’s position and per diems interfere with organizational and business opportunities The WSJ article (Murti, 06/08/05) offers two opposing views concerning the move toward Board declassification. First, Patrick McGurn, a senior vice president of Institutional Shareholders Services, indicates that studies and empirical evidence show “pretty conclusively that unlike poison pills, there is no evidence that the boards use (sic)classified structure to enhance shareholder value...In fact, the opposite appears to be true” (p. 2B2). In opposition, Richard Koppes, former general counsel for California Public Employees’ Retirement System states “directors are more likely to ask critical questions in board meetings if they don’t have to face elections every year” (p. B2B). Not considered as part of declassification, voting, and/or poison pill issues is the impact of these changes to the individual Director’s and the collective group’s ability to learn, which is the foundation for critical thinking and informed, symmetric decision-making. Today, information moves at an extreme velocity and organizations are in the data business. As a result, learning has replaced capital as a scarce resource (Stewart, 1997; Schwandt, 1995; Marquardt, 2002). This article explores the impact declassification has on the quality of individual and group learning and the decisions made by Boards of Directors. The paper will also offer alternative actions that must be considered if corporate governance is to serve stockholders and offer sound outcomes.

Declassification of corporate directors: Addressing the real concerns affecting stockholders.