A firm is using cumulative voting and four director spots are up for election. There are 3.6 million shares outstanding. How many shares must a minority owner own or control to ensure that he or she can gain control of one seat on the board of directors?

Question

Quizplus · Accepted Answer

In cumulative voting, a minority shareholder can secure a board seat by owning more than 1/(number of seats + 1) of the shares. For 4 seats, this is 1/(4+1) = 1/5. Therefore, 3.6 million shares * 1/5 = 720,000.1 shares are needed, so owning 720,001 shares ensures control of one seat.

A Firm Is Using Cumulative Voting and Four Director Spots