CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process
A company elects 4 directors at its annual meeting. An investor owns 1,000 shares and the company uses cumulative voting. The investor wants to maximize the chance of electing one preferred candidate. The maximum number of votes the investor can cast for that candidate is closest to:
The investor can cast about 4,000 votes for one candidate. Under cumulative voting, total votes equal shares owned times seats up for election, here 1,000 times 4. The investor may concentrate all of them on a single nominee, which helps minority holders gain board representation.
- A1,000
- B4,000Correct
- C5,000
Explanation
Under cumulative voting, total votes equal shares multiplied by the number of seats: 1,000 x 4 = 4,000. All of them may be placed on one candidate. 1,000 is the statutory voting result, which gives only one vote per share. 5,000 wrongly adds an extra seat.
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