Question

Assume that ABC Corp. will elect for four directors this year, and ABC’s shareholder include ABC Holdings. Co, which has 81% of shares, John Doe, who has 3% of shares, and James Hoffa, who has 16% of shares. ABC Corp. will elect the new director based on cumulative voting. Currently, John Doe is planning to use all of his votes to vote for Jane Erickson, who Doe believes will best represent his interests as a shareholder. Hoffa is currently planning to vote for Willy Bulger, who Hoffa believes will best represent his interests. Recently, Doe and Hoffa began talking about the possibility where they will both pledge all of their votes to Henry Hill, a compromise candidate who they thought could represent both of their interest to some extent. Which of the following most accurately describes a possible outcome of this election?

A.) If Doe votes for Erickson and Hoffa votes for Bulger, then both Erickson and Bulger will be elected as a director.

B.) If Doe votes for Erickson and Hoffa votes for Bulger, then Erickson will not be elected but Bulger will be elected as a director.

C.) Doe and Hoffa will be able to elect Harry Hill, the compromise candidate, as one of the new directors if they both pledge all of their votes to Hill.

D.) Neither Doe nor Hoffa will be able to elect any director for the firm even if they both pledge all of their votes to Harry Hill, the compromise candidate.

Answer 1

Answer : Correct option is (c.)  Doe and Hoffa will be able to elect Harry Hill, the compromise candidate, as one of the new directors if they both pledge all of their votes to Hill.

Reason :

Under Cumulative Voting system the number of votes get multiplied by the number of directors to elect.Therefore the shareholder can vote over to the single person of their choice to give him all the votes .In the present case Doe and Hoffa cannot singly elect without pledging shares but they will be able to elect elect Harry Hill, the compromise candidate, as one of the new directors if they both pledge all of their votes to Hill.