Question

Mr. Michaels controls proxies for 40,000 of the 75,000 outstanding shares of Northern Airlines. Mr. Baker heads a dissident group that controls the remaining 35,000 shares. There are seven board members to be elected and cumulative voting rules apply. Michaels does not understand cumulative voting and plans to cast 100,000 of his 280,000 (40,000 × 7) votes for his brother-in-law, Scott. His remaining votes will be spread evenly for three other candidates.

How many directors can Baker elect if Michaels acts as described above? Assume Mr. Baker casts an equal number of votes for each open position. (Do not round intermediate calculations and input your answer as a whole number.)

Answer 1

Michaels can cast his total votes to Severn Board members

Explanation: Cumulative voting rules do not limit shareholder to cast limited board members of nominated. Shareholder has can split their votes and cast to elect all board members or can cast all votes to elect one nominated director.

Michael does not understand the cumulative voting system if so, will cast his total 280000 votes to elect the board member/s

Example: if the election is for four directors and you hold 1000 shares (with one vote per share), under the regular method you could vote a maximum of 1000 shares for each one candidate (giving you 6,000 votes total —1000 votes per each of the six candidates). With cumulative voting, you are afforded the 6,000 votes from the start and could choose to vote all 6,000 votes for one candidate, 2,000 each to three candidates, or otherwise divide your votes whichever way you wanted.