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Election of Directors

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Blue Moon Corporation has one million shares of common stock outstanding. In a typical annual election for the board of directors, shareholders representing 70 percent of the shares outstanding exersize their right to vote. The company has nine members on its board of directors, all of whom are elected annually.

a. If the company uses a majority voting procedure, how many votes are required to elect:
i. one director
ii. two directors
iii. a majority of the members of the board of directors

b. If the company uses a cumulative voting procedure, how many votes are required to elect:
i. one director
ii. two directors
iii. a majority of the majority of the board members

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Solution Summary

The solution explains the calculation of required votes to elect a director using majority voting and cumulative voting using the example of Blue Moon Corporation

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Majority Voting Procedure - Under majority voting, each share of stock allows the shareholder one vote, and each position on the board of directors is voted on separately. Because each member of the board of directors is elected by a simple majority, a majority of shares has the power to elect the entire board of directors.
In majority voting procedure, each director has to get a majority of votes to get elected. With 1 million shares outstanding and 70% of the shareholders voting, there would be 700,000 votes. For a director to be elected, he or she should get 351,000 votes. The shareholders would vote for ...

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