Question

1. Which of the following statements about common stock voting is/are correct?

I. Majority voting typically prohibits a group of stockholders with a minority viewpoint from having any representation on the board.

II. Cumulative voting allows each share of stock to represent as many votes as there are directors to be elected.

A. Only statement I is correct

B. Only statement II is correct

C. Both statement I and statement II are correct

D. Neither statement I nor statement II is correct.

4. A proxy is

A. a coupon attached to each share of stock and used by the shareholder in casting his vote on current issues.

B. a warrant allowing a stockholder to purchase a specified number of additional shares at a given price.

C. a device for circumventing regular voting procedures.

D. a supplement to a preferred stock

Answer 1

1. Both statements I & II are correct.

Explanation - if a firm is electing 5 directors, a particular holder of 100 shares would have 500 votes and could cast all of them for one candidate, thereby increasing that candidate’s chances for being elected to the board.

It requires more than 50 % of votes to elect a director. With majority voting, it is possible that a group of stockholders with a minority viewpoint will have not representation on board.

4. a device for circumventing regular voting procedures.

Explanation -->> Proxy voting is used to describe means for shareholders to participate in a company’s annual shareholders meeting,without attending the meeting in person. This way, shareholders who do not attend a meeting may vote on the matters to be considered at the meeting.