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

Answer 1

Stockholders are the owners of a firm. The ownership of the firm is represented on the balance sheet of a company. The ownership is obtained by the purchase or control of shares of stock issued by a firm.

A company is controlled by the board of directors. The shareholders represent the primary owners or decision-makers of a company. The board of directors are voted on and confirmed annually by the shareholders of a firm.

Stockholder	Shares Controlled	% of shares controlled	Shareholders
Mr. Clark	35,001	33.33%	4
Ms. Ramsey	45,001	42.85%	5
Other Stockholders	24,998	23.80%	3
Total	105,000	100.00%	12

a. How many directors can Mr. Clark be sure of electing?

No of directors that can be elected = (Shares owned -1) * (Total no of directors to be elected + 1) / Total no of shares outstanding

No of directors of Mr. Clark = 35000 * (12 + 1) / 105,000 = 4.33 (4 approx)

Hence Mr. Clark can select 4 members.

b) How many directors can Ms. Ramsey and her friends be sure of electing?

No of directors of Ms. Ramsey = (45000 * 13 ) / 105000 = 5.57 (5 approx)

Hence Ms. Ramsey can select 4 members.

c-1. How many directors could Mr. Clark elect if he obtains all the proxies for the uncommitted votes?

No of directors that can be elected = ((35001 + 24998 - 1) * 13 ) / 105000 = 7.42 (7 approx)

Hence Mr. Clark can select 7 members if he obtains proxies.

c-2. Will he control the board?

Yes, he will control the board as he would have majority of the seats on the board (7 of 12).

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?

No of directors that can be elected = (Shares owned -1) * (Total no of directors to be elected + 1) / Total no of shares outstanding

No of directors that can be elected = (41,001 + (24,998/2) -1) * (9+1) / 105,000 = 5.09 (5 approx).

Hence Mr. Clark can select 5 members.

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