Question

Camm corp. has 10,000,000 common shares outstanding. its four directors are elected by cumulative voting. to elect one director, a shareholder must own at least:

Answer 1

Answer:

2,000,001 shares

Explanation:

To solve this question, we need to use the cumulative voting formula:

X = [(S x N) / (D + 1)] + 1

• X = minimum number of shares that must be owned  = ?
• S = total outstanding shares  = 10,000,000
• N = number of directors we want to elect = 1
• D = total number of directors to be elected = 4

X = [(10,000,000 x 1) / (4 + 1)] + 1 = (10,000,000 / 5) + 1 = 2,000,001

There are two voting procedures used to elect the members of a board of directors: the straight voting method and the cumulative voting method.

1. The straight voting method favors majority stockholders since they receive one vote per stock per open seat which means that someone that has 50% plus 1 stock can actually get all the board members elected.
2. Cumulative voting system assigns one vote per stock for the whole election, that means that a board member could be elected with 20% plus 1 vote. This voting system favors minority shareholders since someone with 50% plus 1 vote could only get 2 members elected by himself/herself.