Question

Question: Midland Petroleum is holding a stockholders’ meeting next month. Ms. Ramsey is the president of the company and has the support of the existing board of directors. All 12 members of the board are up for reelection. Mr. Clark is a dissident stockholder. He controls proxies for 34,001 shares. Ms. Ramsey and her friends on the board control 44,001 shares. Other stockholders, whose loyalties are unknown, will be voting the remaining 24,998 shares. The company uses cumulative voting.

a. How many directors can Mr. Clark be sure of electing?

Short answer

Answer

The number of directors that Mr. Clark can elect is 4.

Step-by-step solution

Information provided in the question

Number of directors = 12

Proxies controlled by Mr. Clark = 34,001 shares

Calculation of the number of directors that can be elected by Mr. Clark

Mr. Clark can elect 4 directors.

$$\begin{gathered} \begin{array}{rcl}\text{Number of directors that can be elected}& =& \frac{\left(\text{Shares owned}-1\right) \\ \times \left(\text{Total number of directors to be elected}+1\right) \\ }{\text{Total number of shares outstanding}}\\ & =& \frac{\left(34,001-1\right)\times \left(12+1\right)}{\left(34,001+44,001+24,998\right)}\\ & =& \frac{442,000}{103,000}\\ & =& 4.3\\ & & \end{array} \end{gathered}$$