Question

Asked Apr 29, 2019

Hot Bagels Inc. has been experiencing declining earnings but has just announced a 50 percent salary increase for its top executives. A dissident group of stockholders wants to oust the exisiting board of directors. There are currently 14 directors and 32,500 shares of stock outstanding. Mr. Thomas, the president of the company, has the full support of the existing board. The dissident stockholders control proxies for 15,001 shares. Mr. Thomas is worried about losing his job.

A. Under cumulative voting procedures, how many directors can the dissident stockholders elect with the proxies they now hold? How many directors could they elect under majority rule with these proxies?

B. How many shares (or proxies) are needed to elect nine directors under cumulative voting?

Step 1

Calculating the number of directors can be elected by the dissident stockholders with proxies they now hold using cumulative voting procedures. We have,

Number of directors that can be elected = [(Share owned – 1) x (Total number of directors to be elected + 1)] / Total number of share outstanding

Number of directors that can be elected = [(15,001 – 1) x (14 +1)] / 32,500

Number of directors that can be elected = [15,000 x 15] / 32,500

Number of directors that can be elected = 225,000 / 32,500

Number of directors that can be elected = 6.92

Number of directors that can be elected = 6 directors

Step 2

Calculating the number of director elected by dissident stockholders using majority rule with these proxies. We have,

The number of director elected by dissident stockholders using m...

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