A firm has two classes of common​ stock

Question

A firm has two classes of common​ stock: Class A and Class B. Class A shares award one vote at the annual shareholders meeting. Class B shares award ten votes. There are 1850 shares of Class A common stock outstanding and 80 shares of Class B common stock outstanding. The majority shareholder owns all of the Class B shares and some of the Class A shares. You own the remainder of the Class A shares. The firm has 18 directors on its board of directors and uses cumulative voting. If the majority shareholder is​ hostile, how many Class A shares must you own to be guaranteed the ability to place one candidate on the board of​ directors?

The answer is 140, what are the steps

Answer 1

Hi Mark!

We know that there are 1,850 shares of Class A stock and each one of them holds one vote. This means that there are 1,850 votes from Class A stock. On the other hand there are 800 shares of Class B stock and each share holds a voting power of 10. This means that there are 800 votes here. The majority shareholder holds all of these 800 votes and some of the 1,850 votes. You need to figure out how many class A shares you should hold to put one candidate in. Thus, the total number of candidates is 19 (total). The total number of votes that are out there are. 1,850 + 800 = 2,650. You then divide this number by the total number of candidates as this would be the amount of votes to guarantee you to be able to place one so you get 2,650 / 19 which is around 140 shares of class A stock (140 votes). Hopefully this helps! Feel free to reach out if you need any other specifics!