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Cumulative Voting
Practical Law Glossary Item 7-382-3671 (Approx. 3 pages)
Glossary
Cumulative Voting
Cumulative voting gives each voting stockholder of a business entity a number of votes equal to the number of voting shares it holds multiplied by the number of directors up for election to the board of directors. This allows each voting stockholder to allocate all of its votes to one or more directorial candidates, as the stockholder desires.
For example, if a majority stockholder owns 1,000 voting shares, a minority stockholder owns 300 voting shares, and there are five directorial candidates, then under:
- The regular method of voting, the stockholders vote their shares for the entire slate of directors, which allows the majority stockholder to elect the entire slate by virtue of its 1,000 to 300 share majority.
- Cumulative voting, the stockholder owning 300 shares receives 1,500 votes (300 shares multiplied by five candidates) that it can allocate toward the election of one candidate. If it does so, and if the majority stockholder spreads its 5,000 votes across the five candidates, then the 1,500 votes allocated by the minority stockholder for one candidate defeat the majority stockholder's 1,000 votes for that candidate.
For examples of stockholders proposals requesting cumulative voting for director elections, see Practice Note, What's Market: Stockholder Proposals 2011.
For examples of other substantive and procedural governance-related protections a minority stockholder may seek, see Practice Note, Stockholder Protections.