Question

You own 20 % of the stock of a company that has 10 directors on its board. How much representation can you get on the board if the company has cumulative​ voting? How much representation can you ensure if the company has straight​ voting? How much representation can you get on the board if the company has cumulative​ voting?

Answer 1

Answer and Explanation:

1. If the company uses cumulative voting, I will be able represented by 2 directors on the board because I own 20% of the stock of the company. Since there are 10 seats (for 10 directors) on the board, I will be represented by: (20 ÷ 100) × 10 = 2 directors.

2. If the company uses straight voting, then I shall be entitled to vote for only one candidate per each of the 10 seats for the positions of board of directors. However, the number of seats I will be represented by will depend on the winner for each seat or position of director. In straight voting, if someone else owns a higher stock than me, the person can easily defeat the people I would vote for, and control the entire 10 seats on the board, thus leaving me with no representation (seats or directors).