Question

The Beasley Corporation has been experiencing declining earnings but has just announced a 50 percent salary increase for its top executives. A dissident group of stockholders wants to oust the existing board of directors. There are currently 15 directors and 31,000 shares of stock outstanding. Mr. Wright, the president of the company, has the full support of the existing board. The dissident stockholders control proxies for 12,001 shares. Mr. Wright is worried about losing his job.

a-1. Under cumulative voting procedures, how many directors can the dissident stockholders elect with the proxies they now hold? (Do not round intermediate calculations. Round your answer down to the nearest whole number.)
  

a-2. How many directors could they elect under majority rule with these proxies?
  

	One
	Two
	Three
	Four
	None

b. How many shares (or proxies) are needed to elect eight directors under cumulative voting? (Do not round intermediate calculations. Round your answer up to the nearest whole number.)
  

Answer 1

Answer: a - 1

Number of directors that can be selected = (Shares owned - 1 * Total No. of directors + 1) / Total no. of Shares Outstanding

Under the current situation, there are 12,001 proxies or shares, 15 seats of board of directors and total of 31,000 shares outstanding

Hence,

no. of directors that can be elected = (12,001 - 1) * (15+1) / 31,000

                                                   = 12,000 * 16 / 31,000 = 6.19

therefore,6 directors can be elected by dissident shareholders.

Answer: a - 2

Under the majority rule, No directors can be elected because existing BOD owns majority of shares.

Answer b: Shares required to elect 8 directors

               = (8 * 31,000) / (15 + 1) + 1

               = 15,501 Shares