International Paper Dumps Staggered Board Elections

International Paper's board of directors this week authorized an amendment to the company's certificate of incorporation to declassify the board, and to provide for the annual election of directors.  The company's proxy statement will include a proposal to the shareholders, which was recommended by the board, to approve the amendment at the 2008 annual shareholder's meeting.

Currently, directors at the company are elected by class to staggered three-year terms.  If the amendment is approved, declassification will be phased in over a three-year period, and beginning with the 2011 annual meeting, directors will be elected each year for one-year terms.

"Our board of directors has reviewed these issues carefully and decided to begin instituting this change," said John Faraci, International Paper chairman and CEO, in a recent statement.  "Over the past several years, the company considered the issue of annual director elections, and with the transformation plan well underway, we believe the timing is right to move forward."

In late September, a research report from Moody's indicated that the paper and forestry products industry lagged other industries in corporate governance matters. The report found that companies in the industry tended to have anti-takeover defenses, entrenched boards and management teams, and other indicators for poor governance.