Firm X has 150,000 outstanding shares and 9 directors.Joe Stone owns 37,500 shares of firm X.How many directors can Joe elect with cumulative voting?

Question

Quizplus · Accepted Answer

With cumulative voting, Joe Stone can assign all his votes to a single director or distribute them among multiple directors. Joe has 37,500 shares, which means he has 37,500 votes (1 share = 1 vote).

The formula for calculating the minimum number of shares needed to elect a given number of directors is:

Minimum shares = Total shares / (Number of directors + 1)

In this case, the minimum number of shares needed to elect one director is:

Minimum shares = 150,000 / (1 + 1) = 75,000

Since Joe has 37,500 shares, he cannot elect a director on his own. However, if he groups his votes with other shareholders, they may be able to elect a director.

The minimum number of shares needed to elect two directors is:

Minimum shares = 150,000 / (2 + 1) = 50,000

Joe can elect two directors with his 37,500 shares because 2 * 37,500 = 75,000, which is greater than the minimum shares needed. Therefore, the answer is choice C (2 directors).

Firm X Has 150,000 Outstanding Shares and 9 Directors