Suppose a firm has 10 million shares of common stock outstanding and seven candidates are up for election to three seats on the board of directors. If the firm uses cumulative voting to elect its board,what is the minimum number of votes needed to ensure election to the board?

Question

Quizplus · Accepted Answer

In cumulative voting, each shareholder gets to distribute their total number of votes across the candidates as they choose. To ensure election to the board, a candidate would need to receive at least 1/4 of the total number of votes (since there are three seats to be filled).

10 million shares x 1 vote per share = 10 million total votes
10 million total votes ÷ 4 = 2.5 million votes needed to ensure election

However, because of the cumulative voting system, a candidate can receive all of a shareholder's votes, even if they have fewer votes than the threshold calculated above. So, the minimum number of votes needed to ensure election would be if all shareholders who vote give all of their votes to one candidate for each of the three seats:

3 seats x 2.5 million votes per seat = 7.5 million votes needed to ensure election

Therefore, the best choice is D) 7,500,001.

Suppose a Firm Has 10 Million Shares of Common Stock