Cumulative Voting Protects Minority Shareholders

How cumulative voting works

Usually, the articles of incorporation provide that shareholders vote for an entire slate in a "straight" vote. Thus, the shareholders with the most shares (called the majority shareholders) will always be able to outvote minority shareholders (those shareholders with minimal votes) relating to either the election of directors or other ordinary corporate matters. Cumulative voting is a technique whereby minority shareholders concentrate all of their voting strength on one or more individual directors with the hope that they are elected. It is an excellent way of helping to preserve minority shareholder representation on the board of directors. The formula is the number of shares held times the number of individual directors to be elected.

EXAMPLE 1 Barton Cain owns 105 shares of Soloway Sugar Refining Corp. Soloway's articles of incorporation stipulate cumulative voting for the election of directors. Barton may cast 420 votes (number of shares held [105] times directors to be elected [4]) for one or more directors of his choice.

EXAMPLE 2 Mary Benis owns 105 shares and Todd Tryon owns the other 300 shares of the Rochester Travel Agency Ltd. Rochester's articles of incorporation stipulate cumulative voting for the election of directors. Mary wants to elect A, B, and C as directors while Todd wants X, Y, and Z. In straight voting, Todd would be able to elect X, Y, and Z, thereby, denying Mary representation on the board. However, under cumulative voting, Mary would have 315 votes (105 shares % 3 directors). If Mary concentrates all of her votes on either A, B, or C, she will be able to elect at least one director. Todd has 900 votes (300 shares % 3 directors). If Todd spreads all of his votes among X, Y, and Z, each will receive 300 votes (900/3). Since Mary's 315 votes will always exceed the votes needed to elect at least one director, she is always assured at least some representation on the board.

Thus, cumulative voting is an excellent device for use in a closely held corporation where minority shareholders always fear that they will be shut out from representation on the board. Note that cumulative voting only applies to the election of directors. All other corporate matters are usually decided by straight voting.

CORPORATIONS STEP-BY-STEP by David Minars, M.B.A., J.D., CPA. Copyright 1996 by Barron's Educational Series, Inc. Published by arrangement with Barron's Educational Series, Inc.

The Civil Rights Act of 1871
Law bans discrimination enacted under color of state law

State Will Statutes
State Differences in Last Will and Testament Checklist

Discrimination
Federal laws prohibit discrimination on the basis of race, color, religion, sex, national origin, age, or disability

Case Law Development: Inter-American Commission on Human Rights Finds Domestic Violence Police Response Case Admissible
The Inter-American Commission on Human Rights, in the case of Jess...

Eminent Domain in China: Private property rights law opens the door to capitalism
by Priya Prakash Royal'The revision of the property law delivers a...

California's Proposed Student Civil Rights Act Gives Broad Definition to "Religion"
On Tuesday, the California Senate Judiciary Committee approved by ...

Eminent Domain, Fifth Amendment Property Rights, and Government Retaliation
On June 25, 2007, the Supreme Court of the United States dec...

Civil Rights Leader Settles Discrimination Lawsuit
Atlanta, GA: Rep. John Lewis has spent a large part of his life fi...

Sen. Obama Voting Rights Syllabus
Someone was kind enough to send me this 2002 syllabus from Sen. Obama's Voting Rights course...

The Trivialization of Voting Rights?
Riley v. Kennedy was argued on March 24th and awaits decision by SCOTUS. But the legal question argued is much less interesting than a larger sociological point raised by the case ? a tendency for voting rights litigation today to become bogged down in bureaucratic and legalistic minutiae...

Freddic Mac's Capped Voting
Freddie Mac has just changed its capped shareholder voting bylaw that disables any shareholder from voting over 20 percent of the outstanding voting stock unless the others shareholders vote to allow it...

Allocation and cumulative need
Ahmad, R (on the application of) v London Borough of Newham [2008] EWCA Civ 140 was Newham’s appeal of a JR decision that its allocation scheme was unlawful for failing to take adequate account of cumulative need...

Persistent confusion over ex-felon voting rights
This local Alabama piece, headlined "State's felon voting law still unclear," tells a story that seems too common: even when states make efforts to restore the voting rights of former felons, legal confusion and uncertainty often reigns...

"Justice Dept called uncooperative on voting rights"
The AP has this report on Attorney General Mukasey's testimony before the House Judiciary Committee, during which Chairman John Conyers (D-MI) complained that DOJ hasn't been sufficiently cooperative with Congress on voting rights issues...

Can a former employee use photographs of jobs completed whie working for me in marketing material for a new business?
There are several issues here

1. Sub contractor started up a compe...

My husband's Grandmother died intestate. She had one sole heir, my husband's Father. He and his wife kept paying taxes on the property.Then he also died intestate. Now, my Mother-in-law wants to sell this property. Accor
Based on my research, his wife would have a 1/3 interest in the property. The ot...

What rights does a father have when a woman waits 13 years to tell a man he is a father & he missed out on the growing up of that child?
Actually, he has as much right as she to request a paternity test, plus he can f...

My exwife got a judgement aganst me. years latter i remarried and bought a home i told my new wife that I was not sure about owning real property so soon . our realtor told us I could file a quick claim deed. i sign it t
A quick claim deed has "No warranties" to anything. Your real estate a...

I want to know if its legal for a healthcare provider to tell you something is going to be covered and when it isn't charge you; after you specifically said you couldn't afford it?
I'm not going to sugar coat anything. It's a sad world we live in toda...