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 42,001 shares. Ms. Ramsey and her friends on the board control 52,001 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 68,001 shares and Mr. Clark had 48,001 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

In cumlative voting each share gets as many votes as no of directors to be voted. In this case 12

The formula to find out the no of shares required to elect majority directors is:

where,

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

We ca use the above formula to calculate given a number of shares, how many directors can be elected.

	Total Shares=	119,000
	Total directors	12
	Total votes	1,428,000
	No of shres needed to elect 1 director	109,847	<--X
a)	Mr Clark shares	42,001
	No of directors elected	5	<--42001*12/109847.15
b)	Ms. Ramsey and her friends shares	52001
	No of directors elected	6	<--52001*12/109847.153846154
c1)	Mr Clark shares	42,001
	Uncomitted votes	24998
	Total	66,999
	No of directors elected	7	<--66999*12/109847.153846154
c2)	Yes he will control the board as he has more than 50% of the total board seats

The abaove table gives the case facts along with the answers

Please reach out for any clarifications