Hey guys!
I had this question pop up in my practice exam and wanted to review to make sure I’m understanding the shareholder voting rights.
“An investor with 700 shares of Sidney Corp. Stock, under a statutory voting system, is set to vote on a BOD position. With 3 board seats open, how many votes could the investor apply to a single board seat?”
My answer was 233 votes, and the correct answer listed is 700 votes, and I believe this is an incorrect correction.
Investor.gov writes: “In contrast, in ‘regular’ or ‘statutory’ voting, shareholders may not give more than one vote per share to any single nominee.”
Am I thinking about this question incorrectly, or is there a mistake?
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Statutory voting: One vote per share for each seat of the BOD. In your example the shareholder can apply up to 700 vote per each seat
Cumulative: One vote per share per seat per each sear of the BOD. In your example if would be cumulative voting the shareholder has 2100 that can allocate in whatever proportion to the seats (e.g. 1000 to two seats and 100 to the third one)
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Hi, good question. It’s as @David_Al has said - the question is correct since the shareholder gets one vote per share per position.
Here’s the relevant part of the Board of directors chapter for your review:
Statutory
Allows the stockholder to apply only the amount of votes they have to each BOD position being voted on. Statutory voting structures are more beneficial for larger stockholders.
An investor owns 100 shares of stock with a statutory voting structure. There are 3 open board positions.
The investor has 300 votes
- 100 shares x 3 open positions
- The investor can only apply up to 100 votes per open position
Cumulative
Allows the stockholder to apply the total amount of votes they have to any BOD position being voted on. Cumulative voting structures are more beneficial for small stockholders.
An investor owns 100 shares of stock with a cumulative voting structure. There are 3 open board positions.
The investor has 300 votes
- 100 shares x 3 open positions
- The investor can apply up to 300 votes in any manner