Question

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 14 directors and 32,500 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 15,001 shares. Mr. Wright is worried about losing his job.

a. Under cumulative voting procedures, how many directors can the dissident stockholders elect with the proxies they now hold? How many directors could they elect under majority rule with these proxies?

Short answer

Answer

The dissident stockholders can elect 6 directors with the proxies held by them. The dissident stockholders hold minority shares, so they cannot elect directors as per the majority rule.

Step-by-step solution

Information provided in the question

Shares owned = 15,001 shares

Shares outstanding = 32,500 shares

Total number of directors = 14

Calculation of number of directors that can be elected

The number of directors that can be elected is 6.

Explanation for the directors that can be elected under majority rule

The dissident stockholders cannot elect directors under the majority rule as the dissident stockholders hold the minority shares and the majority shares are held by other stockholders.