In publicly held companies, staggered boards have the effect of making hostile takeover attempts more difficult. When a board is staggered, hostile bidders must win more than one proxy fight at successive shareholder meetings in order to exercise control of the target firm. Particularly in combination with a poison pill, a staggered board that cannot be dismantled or evaded is one of the most potent takeover defenses available to U.S. companies. See Lucian Bebchuk, John C. Coates IV, and Guhan Subramanian, The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, 54 Stan. L. Rev. 887 (2002).
Institutional shareholders are increasingly calling for an end to staggered boards of directors -- also called "declassifying" the boards. The Wall Street Journal reported in January of 2007 that 2006 marked a key switch in the trend toward declassification or annual votes on all directors: more than half (55%) of the S&P 500 companies have declassified boards, compared with 47% in 2005. (Jared A. Favole, "Big Firms Increasingly Declassify Boards", The Wall Street Journal, Jan. 10, 2007.)
Staggered boards can provide leadership security and continuity. Similar staggering of terms are used for that reason in the election of U.S. Senators, members of the Securities and Exchange Commission, and other public bodies. By design, they have the effect of limiting control of a representative body (a board of directors, the Senate, the SEC, etc.) by the body being represented (shareholders, voters, the President).