Question

The Beasley Corporation has been experiencing declining earnings but has just announced a 50 percent salary increase for its top executives. A dissident group of stockholders wants to oust the existing board of directors. There are currently 11 directors and 36,000 shares of stock outstanding. Mr. Wright, the president of the company, has the full support of the existing board. The dissident stockholders control proxies for 17,901 shares. Mr. Wright is worried about losing his job.

a-1. Under cumulative voting procedures, how many directors can the dissident stockholders elect with the proxies they now hold? (Do not round intermediate calculations. Round your answer down to the nearest whole number.)
  

a-2. How many directors could they elect under majority rule with these proxies?
  

	One
	Two
	Three
	Four
	None

b. How many shares (or proxies) are needed to elect nine directors under cumulative voting? (Do not round intermediate calculations. Round your answer up to the nearest whole number.)
  

Answer 1

a1). Number of Directors that can be elected

= [(Shares Owned - 1) x (Total number of directors to be elected + 1)] / Total Shares Outstanding

,= [(17901 - 1) x (11 + 1)] / 36,000 = 214,800 / 36,000 = 5.97, or 6

a2). None

This is because the existing board controls over 50 percent of the shares.

b). Shares Required

= [{Number of directors desired x Total number of shares outstanding} / (Total number of directors to be elected + 1)] + 1

= [(9 x 36,000) / (11 + 1)] + 1 = 27,000 + 1 = 27,001 shares