Most widely held corporations have eliminated staggered boards, and the pressures on those that have not have risen dramatically in recent months.

The board of directors of Target Corp., for example, which won a bitter proxy battle against Pershing Square Capital Management earlier this year, have just approved amendments to its articles of incorporation that would end its staggered board beginning with the 2011 shareholders’ meeting.

Staggered boards came to prominence largely as a defense against unwanted takeover bids. With a staggered board of directors—sometimes referred to as a classified board—shareholders elect three or four directors each year in a class, most often for a term of three years, making hostile takeover attempts more difficult.

By staggering the election of directors, hostile bidders face more than one proxy fight to gain control of the target firm. Particularly when combined with a poison pill, the staggered board makes for potent defense against an unwelcome takeover.

In theory, staggered boards offer benefits to shareholders when compared with unitary boards, including greater stability, greater independence for outside directors, and a longer term perspective, all things shareholders should want, too, according to Guhan Subramanian, a professor of business and law at Harvard, writing in The New York Times. Also, because companies increasingly require that board candidates win a majority of votes cast, directors would seemingly value the right to face election every three years, rather than every year. It is not unusual in Europe, for example, for shareholders to elect directors to six-year terms but retain the right to remove them from office at any time.

Yet opponents of staggered boards find them less accountable to shareholders and a breeding ground for a fraternal atmosphere inside the boardroom that serves to protect the interests of management more than those of shareholders. Furthermore, they contend that unitary boards are stable as well, because the vast majority of board elections are uncontested.

The central argument of institutional investors and other opponents of staggered boards, however, is that staggered boards rob shareholders of the economic benefit of hostile takeovers. The facts support them.

According to a study conducted by three Harvard University professors, including Subramanian, and published in the Stanford Law Review in 2002, in the nine months following a hostile takeover bid, shares of companies with staggered boards increased 31.8 percent, compared to an average of 43.4 percent at companies with unitary boards.

Although hostile takeovers remain rare, the fact remains that shareholders elect directors to represent their interests. If staggered boards deter takeovers, or lessen the premiums paid for shares as a result of takeovers, staggering the board creates a conflict between the board and the shareholders it represents.

Another study by Harvard and Wharton professors examined how 24 governance mechanisms affect shareholder value. The study found that governance mechanisms that strengthen shareholder rights tend to improve share price, while mechanisms favoring management, including staggered boards, and tend to erode value.

So, perhaps not surprisingly, under pressure from institutional investors, there has been a tremendous decrease in the percentage of companies with staggered boards. Among the Standard & Poor’s 500, for example, only 34 percent have a classified board. According to RiskMetrics, 79 publicly traded companies themselves placed declassification resolutions on their ballots in 2008. There were 54 company-sponsored proposals in 2007 and 72 in 2006.

This year saw more of the same.

• In April, Brocade Communications shareowners supported proposals by California’s two largest pensions to do away with the company’s supermajority vote requirement and to elect all directors annually. Leading proxy advisors—RiskMetrics Group, Glass Lewis & Company and Egan-Jones Proxy Services—had all recommended that Brocade shareholders support CalSTRS and CALPERS over management.

• This June, shareholders of the luxury retailer Saks voted to put directors up for election annually in a move to make the board of the struggling retailer more accountable. Shareholders also voted for a proposal that required directors to receive a majority of votes to be elected, rather than a plurality.

• McGraw-Hill fended off an unsolicited bid from American Express in the late 1970s in a much publicized battle, and in the mid-1980s, the company’s shareholders adopted a staggered board and other takeover defenses.

In recent years, a McGraw-Hill shareholder doggedly proposed that the company eliminate its staggered board, and in its proxy statement just this past March, McGraw-Hill urged shareholders to vote against the measure. The proxy argued that the staggered board “increased board stability” and “enhanced the ability to protect shareholder value in a potential takeover.” However, within months, McGraw-Hill reversed course. It has now recommended that shareholders eliminate the staggered board at next year’s annual meeting.

But if Senator Charles E. Schumer has his way, the jig’s up. Legislation that he introduced in May would kill staggered boards forever. He introduced a “shareholder bill of rights” which would give shareholders a “say on pay” and would require that the positions of chairman and chief executive be separated at publicly traded companies. Sen. Schumer’s bill would require that corporate directors receive at least 50 percent of shareholder votes in order to remain on the board and ban staggered boards.

With or without Sen. Schumer’s bill, the number of companies with staggered boards will continue to decline, and for the companies that retain staggered boards, the pressures for “reform” can only mount. Yet managing that transition to a unitary board may also prove difficult.

It will be important, for example, to make certain that the company has done everything it can to create value for shareholders. Companies that have significantly underperformed the market or their peers will be more vulnerable.

Up until 2006, for example, the board of Anheuser-Busch was staggered, with one-third of the directors up for election each year. In response to shareholder pressure, Anheuser-Busch amended its certificate of incorporation to de-stagger the Anheuser board and provide for election of all directors each year. Anheuser-Busch was in the midst of this process when InBev announced its bid. Given the high price offered, and Anheuser-Busch’s poor historical performance, it was game over.

Since resolutions to de-stagger boards often seems to be linked with a requirement that directors receive a majority of shareholder votes, the value created by the board and its individual members must be readily discernable to outsiders.

In personal experience, as a meeting of a CEO search committee broke up, one of the directors turned plaintively to his peers and asked if any other director had less than 50 percent of the votes from the proxies received. The chairman told him, “No, everyone else has at least 60-some percent,” and turned away. It was sad to see the director fumble with his papers as he tried to regain dignity and the embarrassment of the other directors as they tried to shift the conversation. It was awkward for everyone in that room.

The NYSE requires that the boards of all listed companies evaluate performance annually. Yet as recently as 2006, only about one-quarter of public boards had instituted any systematic review of director performance.

The importance of maintaining positive working relationships in the boardroom makes it difficult for most boards to address poor performance. Unfortunately, with the advent of majority voting, reviews of director performance will take place in public with investors axing directors who seem unlikely to foster shareholder value.

Considering the stature of most directors, the prospect of delivering a rebuke is unpleasant. However, from everyone’s perspective, that’s better done quietly than publicly.

Gregory T. Carrott is managing director at Cavoure, a Chicago-based executive recruitment firm.