How is this answer wrong?

The question is:

Your customer owns 700 shares of Quinn Co. stock, which is under a statutory voting system. With 3 open board seats, what is the maximum number of votes your customer may apply towards one board seat?

i put 233 votes, but the answer is 700. Wouldn’t that be for a cumulative voting system though

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Hi @Faint_plum_toad! Thanks for using the forum. Great question too!

Investors receive 1 vote for every share owned multiplied by the number of seats open. This investor owns 700 shares and there are 3 board seats open, which will result in 2,100 votes granted (700 shares x 3 open board seats). Both statutory and cumulative voting structures work this way.

To provide some context, let’s assume these 6 individuals are running for the 3 open board seats:

  • Sam
  • Cassandra
  • Taylor
  • Michael
  • Jasmine
  • Derek

How the votes are allocated depends on the voting structure. A statutory voting system would allow up to 700 votes per open seat to be allocated. Let’s assume the only board member you prefer to vote for is Cassandra. You would be able to allocate up to 700 votes to Cassandra, but no more.

A cumulative voting system would allow up to 2,100 votes total to be allocated. Let’s again assume the only board member you prefer to vote for is Cassandra. You would be able to allocate all 2,100 votes to Cassandra.

Here’s an easy way to answer this type of question:

  • Statutory = # of shares owned equals the number of votes to be applied
  • Cumulative = # of shares x # of board seats equals the number of votes to be applied

I hope this helps!

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Thanks for the response. That makes sense! I completely forgot to multiply by the number of board seats

1 Like