The shareholders of the Pickwick Paper Company need to elect five directors. The

Question

The shareholders of the Pickwick Paper Company need to elect five directors. There are 120,000 shares outstanding.

What is the minimum number of shares you need to own to ensure that you can elect at least one director if the company has majority voting?

What is the minimum number of shares you need to own to ensure that you can elect at least one director if the company has cumulative voting? (Round your answer to the nearest whole number.)

What is the minimum number of shares you need to own to ensure that you can elect at least one director if the company has majority voting?

Explanation / Answer

There are 120,000 shares

a) Each share is considered to have one vote in order to decide whether or not to elect a director. If the director attains majority of yes votes i.e. more than 50% votes or atleast 50% + 1 votes, he can be elected.

Thus, minimum no of shares to own = 50% of 120,000 + 1 = 60,001

b) In cumulative voting, each shareholder is entitled one vote per share times the number of directors to be elected. This is sometimes known as 'proportional voting'.

In this case, we have 5 directors. So, if we have x shares, we get 5x votes.

We will need in order to attain 60,001 votes to ensure we can elect atleast one director.

Thus, number of shares should be atleast = 60001 /5 = 12001 (rounded off)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.