Question

A company uses the cumulative voting method to elect its board members. The total number of shares outstanding is 2,567,538. There are 5 open seats on the board to be filled. Calculate the minimum number of shares an investor should own to be able to guarantee one seat on the board. Group of answer choices 427,924 427,913 527,911 481,726 572,351

Answer 1

When cumulative voting is used, you are assigned 1 vote per each stock that you own. In this case, since 5 seats are up for election, you will need at least 1/6 + 1 of the total stocks outstanding to be 100% sure that you will be elected to the board of directors. If you have 1/6 + 1 of all the stocks, mathematically it is impossible for you not to elect one board member.

2,567,538 x 1/6 = 427,923, but since you need to be 100% sure, you need 1 more vote = 427,924

if you have 427,924 stocks, then if the remaining 2,139,614 stocks are divided by 5 = 427,922.8 votes, which is less than what you have.