Candle box Inc. is going to elect nine board members next month. The firm has 1,000,000...

Candle box Inc. is going to elect nine board members next month. The firm has 1,000,000 shares outstanding. Lucy Liu owns 12.5 percent of the total shares outstanding.

a) How confident can she be of having one of her candidate friends elected under the cumulative voting rules? b) Will her friend be elected if the voting procedure is changed to the staggering rule, under which shareholder vote on 1/3 of total board members at a time?

c) If Candle Box Inc. adopted the straight voting rule and if Lucy wants to ensure that at least one of her candidate friends will be elected, how many additional shares she need to obtain?

Expert Solution

Total Outstanding Share = 1000000

Lucy owns(12%) =120000

Ans a) Yes Lucy liu shold be confident enough as she is holding 12.5% out of total share as the procedure for selection of the Board member is based on the Cumulative share and on this pattern,

If shares= 100

She have =12.5 then it is divided in 8 parts so she have right to elect his Friend.

Ans b) Considering Staggered Rule,

Staggered board structure is the process of structuring the board of directors so that members fall into different classes with different terms.
In a staggered board, some committee members are designated longer terms compared to others.
Sometimes boards are staggered to assign different levels of responsibility to each class.
Elections are held when terms expire, with a one-year classification requiring voting each year.
Staggered boards may deter interventions or takeovers and protect existing management.

Shareholder right is 1/3 *12.5(Her Part) = 4.125% so there is less chance of her friend selection.

Ans c) If Candle Box Inc. adopted the straight voting rule and if Lucy wants to ensure that at least one of her candidate friends will be elected, Lucy wil Not Require Further share as she have 12.5% which give her right to select one Board Member.

jeff jeffy answered 1 year ago

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