Jen owns 30 shares of stock in Delta Fashions and wants to win a seat on the board of directors. The firm has a total of 100 shares of stock outstanding. Each share receives one vote. Presently, the company is voting to elect three new directors. Which one of the following statements must be true given this information?
A) Regardless of the voting procedure, Jen does not own enough shares to gain a seat on the board.
B) If straight voting applies, Jen is assured a seat on the board.
C) If straight voting applies, Jen can control all of the open seats.
D) If cumulative voting applies, Jen is assured one seat on the board.
E) If cumulative voting applies, Jen can control all of the open seats.

Question

Quizplus · Accepted Answer

In straight voting, each shareholder can only vote for as many directors as there are open seats. Since there are three open seats and Jen only owns 30 shares (which translates to 30 votes), she would not have enough votes to win a seat on the board in straight voting.

In cumulative voting, shareholders are allowed to pool their votes and allocate them however they choose among the open seats. This is beneficial for minority shareholders like Jen because they can concentrate their votes on one or a few candidates and ensure representation on the board. With 30 shares, Jen could use cumulative voting to guarantee herself at least one seat on the board, but she would not be able to control all three open seats. Therefore, statement D must be true.

Jen Owns 30 Shares of Stock in Delta Fashions and Wants