Question

Need help figuring out these questions. please help!

The shareholders of the Unicorn Company need to elect 3 new directors. There are 1,000,000 shares outstanding. How many shares do you need to be certain that you can clect at least one director if, (a) Unicorn has straight voting? The shareholders of the Unicorn Company need to elect 3 new directors. There are 1,000,000 shares outstanding. How many shares do you need to be certain that you can elect at least one director if, (b) Unicorn has cumulative voting? Which voting systems (straight vs cumulative) can help a company to protect its ownership and why? Please explain.

Answer 1

(a). To be certain to elect at least one director out of 3 directors you need to have majority of shares in hand for voting. So out of 100000 shares you need to have 50%.

(b) For cumulative voting there is formula to calculate how many votes needed.

Number of votes needed =  (S * X) / (D+1),

where S = the number of shares voting in the election (i.e., total number of votes), X = number of directors you want to elect, D= number of directors up for election.  

Shares needed = (1,000,000*1)/(3+1) = 250,000

Cumulative voting system can help a company to protect its ownership, because it gives power to minority share holder's so that they can also select director.