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.

c. How many directors could Mr. Clark elect if he obtains all the proxies for the uncommitted votes? (Uneven values must be rounded down to the nearest whole number regardless of the amount.) Will he control the board?

Short answer

The number of directors that Mr. Clark can elect is 7 if he can obtain the uncommitted votes and will be able to control more than 50% of the board.

Step-by-step solution

Information provided in the question

Number of directors = 12

Proxies controlled by Mr. Clark = 34,001 shares

Shares held by uncommitted stockholders = 24,998

Calculation of the number of directors that can be elected by Mr. Clark if he obtains uncommitted votes

Mr. Clark can elect 7 directors if he can obtain uncommitted votes and he will control the board as he will control 7 out of 12 directors which is more than 50% of the board.

$$\begin{gathered} \text{Number of directors that can be elected}=\frac{\backslash \mathrm{begingathered}\left(\text{Shares owned}-1\right)\backslash \mathrm{hfill} \\ \times \left(\text{Total number of directors to be elected}+1\right)\backslash \mathrm{hfill} \\ \backslash \mathrm{endgathered}}{\text{Total number of shares outstanding}} \\ =\frac{\left(\left[34,001+24,998\right]-1\right)\times \left(12+1\right)}{\left(34,001+44,001+24,998\right)} \\ =\frac{766,974}{103,000} \\ =7.44 \end{gathered}$$