Question

The shareholders of Vycom, Inc. need to elect five new directors to the board. There are 750,000 shares of common stock outstanding. How many shares do you need to own to guarantee yourself a seat on the board if the company uses cumulative voting procedures?

Answer 1

125000 shares

Explanation: for cumulative voting use formula 1/n+1 + 1 share. Where n = # of director seats open. This formula gives you the % of shares you need to get seat

(1/5+1)(750000)=125000+1 share=125001 shares needed to receive seat.

or just 750000/6 + 1+=125001

Answer 2

375,001 should be own to guarantee a seat on the board

Step-by-step explanation:

Under cumulative voting, a shareholder's voting rights is number of shares held by him times number of seats vacant for board of director.

So as to guarantee a seat on the board using cumulative voting procedure = 50% of shares outstanding + 1 share.

Number of shares outstanding = 750,000

Number of shares required for winning seat = 0.5×750,000 + 1 share

= 375,001 shares

So, one should hold 375,001 shares to be able to guarantee a seat on the board.