CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process
A company has 10 million shares outstanding and elects 4 directors using cumulative voting. A minority shareholder owns 1.5 million shares and will concentrate all votes on one candidate. The total votes this shareholder can cast for that candidate is closest to:
The shareholder can cast about 6.0 million votes. Under cumulative voting each share carries as many votes as there are seats, so 1.5 million shares times 4 seats gives 6.0 million, all of which may be placed on a single candidate.
- A1.5 million
- B6.0 millionCorrect
- C15.0 million
Explanation
Under cumulative voting, votes available equal shares times seats: 1.5 million × 4 = 6.0 million. The 1.5 million figure ignores cumulation (statutory voting). The 15.0 million figure wrongly uses total shares outstanding times 1.5 million divided incorrectly.
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