Question

The shareholders of the Pickwick Paper Company need to elect five directors. There are 200,000 shares outstanding.

a. How many shares do you need to own to ensure that you can elect at least one director if the company has majority voting? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Number of shares needed            

b. How many shares do you need to own to ensure that you can elect at least one director if the company has cumulative voting? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Number of shares needed            

Answer 1

a. Number of shares needed = (200,000 / 2) + 1 = 100,001 shares

b. If the company has cumulative voting, all candidates are voted on at once, and the number of votes cast is 5 × 200,000 = 1,000,000 votes

If your candidate receives one-fifth of the votes, that candidate will place at least fifth in the balloting and will be elected to the board. Therefore, you need to cast 200,000 votes for your candidate, which requires that you own 40,000 shares.

Number of shares needed = 40,000 shares