method of voting that enables a minority group of shareholders to obtain some voice in the control of a corporation. Normally, shareholders must apportion their votes equally among the candidates for the board of directors. Cumulative voting allows them to vote all their shares for a single candidate. The number of shares required to elect a desired number of directors (NR) is calculated by the formula:
NR = [(DN ¥ TN)/(N + 1)] + 1
where DN = number of directors stockholder desires to elect,TN total number of shares of common stock outstanding and entitled to be voted, and N = total number of directors to be elected.
For example, a company will elect six directors. There are fifteen candidates and 100,000 shares entitled to be voted. If a group desires to elect two directors, the number of shares it must have is:
[(2 ¥ 100,000 shares)/(6 + 1)] + 1 = 28,572 shares
Note that a minority group wishes to elect one-third (two out of six) of the board of directors. It can achieve its goal by owning less than onethird (28,572 shares out of 100,000 shares) the number of shares of stock.
system of stockholder voting for a board of directors that allows all the votes an individual is eligible to cast to be cast for a single candidate. The system is designed to give minority stockholders representation on the board. For example, the owner of a single share of stock voting in an election for five directors would be able to cast one vote for each position under a straight voting system, but would be able to cast all five votes for a single position or distribute them in any manner desired under a cumulative voting system.
voting method that improves minority shareholders’ chances of naming representatives on the board of directors. In regular or statutory voting, stockholders must apportion their votes equally among candidates for director. Cumulative voting allows shareholders to cast all their votes for one candidate. Assuming one vote per share, 100 shares owned, and six directors to be elected, the regular method lets the shareholder cast 100 votes for each of six candidates for director, a total of 600 votes. The cumulative method lets the same 600 votes be cast for one candidate or split as the shareholder wishes. Cumulative voting is a popular cause among advocates of corporate democracy, but it remains the exception rather than the rule.