Question

Rho Corporation is electing three directors to its board using cumulative voting, and there are 1,000,000 shares outstanding. If you were a shareholder who wants to be elected to the board, how many Rho Corporation shares must you own to guarantee yourself a directorship seat on the board?

Answer 1

Cumulative voting, also called accumulation voting or weighted voting, is a multi-voting system used by companies to promote a more proportional representation. In cumulative voting, each shareholder gets one vote per share multiplied by the total number of director positions with votes being distributed in whatever proportion the shareholder prefers.

Thus in this case Total votes would be 3*1,000,000=3,000,000 votes

The formula to determine the number of shares necessary to elect a director is:

where

X = number of shares needed to elect a given number of directors

S = total number of shares at the meeting

N = number of directors needed

D = total number of directors to be elected

In this problem:

S=1,000,000

N=1

D=3

Plugging these values

X=250,001

Thus 250,001 votes are required to assure one seat atleast

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