Question

Midland Petroleum is holding a stockholders’ meeting next month. Ms. Ramsey is the president of the company and has the support of the existing board of directors. All 12 members of the board are up for reelection. Mr. Clark is a dissident stockholder. He controls proxies for 35,001 shares. Ms. Ramsey and her friends on the board control 45,001 shares. Other stockholders, whose loyalties are unknown, will be voting the remaining 24,998 shares. The company uses cumulative voting.

a. How many directors can Mr. Clark be sure of electing? (Do not round intermediate calculations. Round down your answer to the nearest whole number.)

b. How many directors can Ms. Ramsey and her friends be sure of electing? (Do not round intermediate calculations. Round down your answer to the nearest whole number.)

c-1. How many directors could Mr. Clark elect if he obtains all the proxies for the uncommitted votes? (Do not round intermediate calculations. Round down your answer to the nearest whole number.)
c-2. Will he control the board?

• Yes

• No

d. If nine directors were to be elected, and Ms. Ramsey and her friends had 61,001 shares and Mr. Clark had 41,001 shares plus half the uncommitted votes, how many directors could Mr. Clark elect? Assume the same number of total shares as the original question. (Do not round intermediate calculations. Round down your answer to the nearest whole number.)

Answer 1

Answer :

(a.) Calculation of Number of Directors that Mr. Clark be sure of electing :

Total Number of outstanding shares = Shares owned by Clark + Shares owned by Ms. Ramsey and her friends + Shares owned by others

= 35001 + 45001 + 24998

= 105000

Number of Directors = [(Shares owned by Clark - 1) * (Nmber of Directors to be elected + 1)] / Total Number of outstanding shares

= [(35001 - 1) * (12 + 1)] / 105000

= 455,000 / 105000

= 4.33 or 4 directors

Mr. Clark be sure of electing 4 directors

(b.)  Calculation of Number of Directors that Ms. Ramsey and her friends be sure of electing :

Total Number of outstanding shares = Shares owned by Ramsey + Shares owned by Clark + Shares owned by others

= 35001 + 45001 + 24998

= 105000

Number of Directors = [(Shares owned by Ms. Ramsey and her friends - 1) * (Nmber of Directors to be elected + 1)] / Total Number of outstanding shares

= [(45001 - 1) * (12 + 1)] / 105000

= 585,000 / 105000

= 5.57 or 6 directors

Mr. Ms. Ramsey and her friends be sure of electing 6 directors.

(c.-1) Calculation of Number of Directors that Mr. Clark be sure of electing if he obtains all the proxies for the uncommitted votes :

Total Number of outstanding shares = Shares owned by Clark + Shares owned by Ms. Ramsey and her friends + Shares owned by others

= 35001 + 45001 + 24998

= 105000

Number of Directors = [(Shares owned by Clark + Uncommited Votes- 1) * (Nmber of Directors to be elected + 1)] / Total Number of outstanding shares

= [(35001 + 24998 - 1) * (12 + 1)] / 105000

= 779974 / 105000

= 7.43 or 7 directors

Mr. Clark be sure of electing 7 directors

(c-2) Yes he can control the board as out of 12 directors he can elects 7 directors

(d-1) Calculation of Number of Directors that Mr. Clark be sure of electing :

Total Number of outstanding shares = Sames as the original question i.e 105000

Number of Uncommitted Shares = 105000 - 61001 - 41001 = 2998

Half of Uncommitted shares = 2998 / 2 = 1499

Number of Directors = [(Shares owned by Clark + Half of uncommitted shares - 1) * (Number of Directors to be elected + 1)] / Total Number of outstanding shares

= [(41001 + 1499 - 1) * (9 + 1)] / 105000

= 424990 / 105000

= 4.04 or 4 directors

Mr. Clark be sure of electing 4 directors