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.
Proportional Voting Special Interest Group
Compare with: Preferred