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.

d. If nine directors were to be elected, and Ms. Ramsey and her friends had 60,001 shares and Mr. Clark had 40,001 shares plus half the uncommitted votes, how many directors could Mr. Clark elect?

Short answer

The number of directors that Mr. Clark can elect is 4 if he can obtain half of the uncommitted votes.

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 half of the uncommitted votes

Mr. Clark can elect 4 directors if can obtain half of the uncommitted votes.

$$\begin{gathered} \text{Number of directors that can be elected}=\frac{\backslash \mathrm{begingathered}\left(\text{Shares owned}-1\right)\backslash \mathrm{hfill} \\ \times \left(\text{Total number of directors to be elected}+1\right)\backslash \mathrm{hfill} \\ \backslash \mathrm{endgathered}}{\text{Total number of shares outstanding}} \\ =\frac{\left(\left[40,001+12,499\right]-1\right)\times \left(9+1\right)}{\left(40,001+60,001+24,998\right)} \\ =\frac{524,990}{125,000} \\ =4.2 \end{gathered}$$