Question

You own 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?

Answer 1

• B.With cumulative voting you are able to get proportional representation by putting all of your votes toward 3​directors, allowing you to elect representatives to 3 seats ​(30% of ten​ seats) on the board.
• B.With​ non-cumulative voting you vote on each director​ individually, and without a majority of the shares you cannot ensure that your representative will win any of the elections​ (you could lose 70% to 30% in each of the ten individual​ elections).

Step-by-step explanation:

Cumulative voting is a method of voting that allows a shareholder to place all the votes they have to one or more person. Normally, during elections for a Board member, each shareholder will be given a certain number of votes and this is usually related to the number of shares they hold. In cumulative voting, they can place all these allowed votes in the corner of one person thereby increasing their chances of getting voted. By owning 30%, you will get 30% of the votes. If you decide to place all 30% for 3 people out of 10, you will get them elected.

With straight voting though, you can only vote once per share owned. That means that you cannot pledge all your votes to a single person or group of people. Should that happen, you cannot ensure that your representative will win as people may outvote your 30% in in each candidate.