Question

Voting. MegaCorp has five directors. The company has 1,050 shares of voting stock. Jessica would like to purchase enough stock to elect herself to the board of directors. The company allows for cumulative voting. Explain the concept of cumulative voting and also state how many shares of MegaCorp stock Jessica will need to own to assure herself a place on the board of directors.

Answer 1

Cummulative Voting

Cummulative voting is a voting system that helps to strenthan the ability of minority shareholders to elect a director. This method allows shareholder to caste all their votes for a single nominee for the board of directors when the compaany have multiple openings on the board. In regular system shareholder may not give more than one vote per share to any single nominee.

For example If election held for 4 directors and you hold 100 shares (with one vote per share), under the regular method you could vote maximum of 100 for each one candidate ( giving you 400 total votes - 100 votes for each of the four director). With Cummulative voting , you are afforeded with the 400 votes from the starting and could choose to vote all 400 votes to one candidate, divide 400 votes between two candidate or you can divide your votes in any praportion you want.

The need of share Jessica need to own to assure herself a place on the board of director :

X = SN    + 1

D + 1

x = number of shares needed to elect a given number of directors.

S = total number of shares at the meeting

N = number of directors needed

D = total number of directors to be elected

=    1050 * 1 + 1

5 + 1

= 1050    +1

6

= 175 +1

= 176

Jessica need to own 176 shares to assure herself a place on board of directors.