Question

Suppose a firm has 57 million shares of common stock outstanding and eight candidates are up for election to six seats on the board of directors.

a. If the firm uses cumulative voting to elect its board, what is the minimum number of votes needed to ensure election to the board?
b. If the firm uses straight voting to elect its board, what is the minimum number of votes needed to ensure election to the board?

Answer 1

In cumulative voting, the minimum number of votes needed to ensure election to the board can be calculated using a specific formula. In straight voting, the minimum number of votes needed is determined by the candidate with the highest number of shares.

Step-by-step explanation:

a. In cumulative voting, the total number of votes needed to ensure election to the board can be calculated using the formula: (Number of shares outstanding) / (Number of seats + 1) + 1.

For this case, the total number of shares outstanding is 57 million and the number of seats is 6. Plugging these values into the formula, the minimum number of votes needed to ensure election to the board is:
(57 million / 7) + 1 = 8,142,858 votes.

b. In straight voting, each candidate needs to receive more votes than any other candidate to ensure election to the board. Therefore, the minimum number of votes needed to ensure election to the board is the number of votes received by the candidate with the highest number of shares.