Proportional Voting

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Description of Proportional Voting. Explanation.

 

Definition Proportional Voting. Description.


Proportional Voting is a form of voting within the Board of Directors in which shareholders can give multiple votes to a candidate. This method gives minority shareholders a bigger influence than the still predominant Statutory Voting, which, by allowing one vote per share per director, makes it possible for a majority shareholder to elect all directors.


A special form of proportional voting is called Cumulative Voting, in which a shareholder may multiply his number of shares he owns by the number of board vacancies to get the total number of votes he has. He may give all of these votes to one candidate or in any mix to the candidates he wishes. This makes it possible for a minority shareholder to get at least some representation on the Board.


Another form of it offers to holders of Preferred Stock the right to elect a number of directors in special circumstances, such as when the company fails to pay preferred dividends.


Example. Suppose a minority shareholder has 100 shares and 4 directors will be elected. Assuming 1 vote per share, our shareholder:

  • in statutory voting, has 100 shares to vote for each of the 4 director seats. He has 400 votes in total.

  • in cumulative voting, may use all of these 400 votes to cast for one director seat (or still split the votes should he desires so).

Also called Proportional Representation.


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