Question

16 --There are 500,000 shares outstanding and I own 10%. We are electing 5 members to the board. How many shares are required to elect 1 board member, under (a) majority voting rules and (b) cumulative rules?

Answer 1

SOLUTION

As per the situation there are 5 lakh shares are outstanding and the person on 10% so for electing five members to the board different procedure is required under majority voting rules and cumulative rule.

(A) MAJORITY RULE

In this person who is selected should have a majority which is more than half of the votes.It is known as the most influential decesion making body.If one member is selected out of five from me than there is the requirement of more than 50% vote for HIM/HER from my end.In this decesion the majority person is always selected.

(B) CUMULATIVE RULE

Cumulative voting are cumulative rule is a method to elect company's director in this method share holder's can vote equals to the number of shares the hold.This is all depends on the share holder if they want to give their votes to ane single candidate or to the multiple candidates.If we talk about this situation here five members will be elected and for electing one board member it all depends on the Number of share holder's and the proportion of share they have and if i own 5% share so it depends on me to split my 5% vote to different candidate or to the same one.

Hence in majority voting rules for selecting one member for the board there should be majority for selecting HIM/HER but in the cumulative rules it all depends on the share holders and the Number of shares they have.