AVTX has 6.8 million shares outstanding and the firm's chatter provides for cumulative voting.The company has a seven member-board of directors, all of whom are up for reelection.What is the minimum number of shares needed to ensure the election of two directors?

Question

Quizplus · Accepted Answer

With cumulative voting, shareholders can distribute their total votes in any proportion they wish among the candidates. To ensure the election of a director, a shareholder needs to accumulate more votes than the other candidates. 
To calculate the minimum number of shares needed to elect two directors, we use the following formula:

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

In this case, the number of seats is 2 (since we want to elect two directors), the number of directors is 7, and the total shares are 6.8 million.

Minimum shares = (2+1) / (7+1) x 6,800,000
Minimum shares = 0.375 x 6,800,000
Minimum shares = 2,550,000

Therefore, a shareholder would need to own at least 1,700,001 shares (i.e., half of 2,550,000 plus one) to ensure the election of two directors. Option D is the correct answer.

AVTX Has 6