You want a seat on the board of directors of Red Cow, Inc. The company has 260,000 shares of stock outstanding and the stock sells for $51 per share. There are currently 5 seats up for election. The company uses straight voting. How much will it cost you to guarantee that you will be elected to the board?
You want a seat on the board of directors of Red Cow, Inc. The company has 260,000 shares of stock outstanding and the stock sells for $51 per share. There are currently 5 seats up for election. The company uses straight voting. How much will it cost you to guarantee that you will be elected to the board?
To guarantee that you will be elected to the board of directors, you need to win more votes than any other candidate. In straight voting, each shareholder can cast one vote for each seat up for election. Therefore, to win a seat, you need to secure more than 50% of the votes cast.
In this case, there are 5 seats up for election, so you need to secure more than 50% of the votes cast for at least 3 of the seats. Since each share of stock entitles the shareholder to one vote, you need to control at least 50% + 1 of the outstanding shares of stock to guarantee your election to the board.
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