What is meant by ‘Cumulative Voting’ ? Encountered a question in Stalla passmaster, which says it is positive for the shareowners … but it dosent look like a very promising option according to schweser notes (book-4,page 75)… Can somebody clear this for me please … Thanks Aby
from what i remember, if several family members own shares of the same company they can use cumulative voting option - they vote as one individual and weight of their vote is proportional to their total number of shares.
Thanks maratikus … am wondering why this would be good for the general shareowners … a large family of shareholders could easily manipulate the board in this situation
here’s an example. Let’s say you have a board with 5 members. That means each shareholder gets 5 votes. Let’s say there are 1000 shares, with 60% owned by family. To keep the 5 people on the bd that they want they need to take their votes (600 shares * 5 votes) and basically divvy them up equally among the 5 people they want, or 600 votes each. the minority holders have 400 shares * 5 votes, or 2000 total votes. They could use cumlative voting to split those votes 3 ways into 667 votes and gain control of the board.
Oh WOW !! Thanks very much Super I.
i still dont get it for some reason, mabye b/c it is too early…