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The Directors of MegaCorp Learn That an Outsider Is Planning

Question 34

Multiple Choice

The directors of MegaCorp learn that an outsider is planning on buying enough voting stock to get herself elected to the board of directors.MegaCorp,which has cumulative voting,quickly puts together a vote of shareholders to eliminate the company's cumulative voting procedure.The shareholders vote to do away with cumulative voting.The outsider,Dawn,who wanted to get herself elected to MegaCorp's board,claims that the company has committed an illegal act.Is she right?


A) Yes.The United States Supreme Court has ruled that a publicly held corporation that purposefully sets about to eliminate cumulative voting to prevent a person from getting herself elected to the board has acted illegally.
B) Yes, but only if the company is incorporated in a state that has adopted the Model Act.
C) No, provided the company did not change its cumulative voting provision solely for the purpose of preventing a particular person from taking advantage of that right.
D) No. Under the Model Act, regardless of MegaCorp's motives, it had the right to act as it did.

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