As a common stockholder, you have the right to vote on the major issues facing the corporation. You are a part owner of the company and, as a result, you have a right to say how the company is run.  The biggest emphasis is placed on the election of the board of directors.

Common stockholders may also vote on:

  • The issuance of bonds or additional common shares
  • Stock splits
  • Mergers and acquisitions
  • Major changes in corporate policy

Methods of Voting

There are two methods by which the voting process may be conducted, and they are known as the statutory and cumulative methods of voting. A stockholder may cast one vote for each share of stock owned and the statutory or cumulative methods will determine how those votes are cast. The test focuses on the election of the board of directors, so we will use that in our example.

TEST FOCUS!

An investor own 200 shares of XYZ. There are 2 board members to be elected and there are 4 people running in the election. Under both the statutory and cumulative methods of voting, you take the number of shares owned and multiply them by the number of people to be elected to determine how many votes the shareholder has.

In this case, 200 shares x 2 = 400 votes. The cumulative or statutory methods dictate how those votes may be cast.

Candidate Statutory Cumulative
1 200 votes 400 votes
2    
3    
4 200 votes  

The statutory method requires that the votes be distributed evenly among the candidates that the investor wishes to vote for.

The cumulative method allows the shareholder to cast all of their votes in favor of one candidate, if they so choose. The cumulative method is said to favor smaller investors for this reason.

 



Liability And Transferability

Related Articles
  1. Investing

    Shareholders: Vote Your Proxy and Be Heard

    Voting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
  2. Investing

    What Is Tenure Voting?

    This stockholder voting structure, one of three types, has advantages and disadvantages. Here’s a look at the pros and cons of all three.
  3. Investing

    Proxy Voting Gives Fund Shareholders A Say

    You have the right to take part in important company decisions - even if you cannot attend the meetings.
  4. Investing

    What Does Your Mutual Fund Say About You?

    How your fund votes on proxy issues will reveal whether it's acting in your best interest and according to your beliefs.
  5. Managing Wealth

    Keeping Control of Your Business After the IPO

    Taking a company public doesn't mean founders must completely give up calling the shots. Before the IPO, consider these tactics to keep control after it.
  6. Investing

    Is the Presidential Election Really Hackable? (MSFT)

    Electronic voting booths need upgrades, but 3/4s of the country still votes on paper.
  7. Investing

    Brexit: Are the Rich Getting Sick of the Poor - and vice-versa?

    The decision to leave the EU underscored the growing gap between the wealthy and everyone else.
  8. Small Business

    How Zuckerberg Will Control Facebook Forever (FB, GOOG)

    Zuckerberg has pledged his wealth for charity, which includes his Facebook stock ownership. Here's how he will still control the Facebook business forever.
  9. Markets

    Why the AB InBev Miller Merger Is More at Risk

    As shareholder voting gets underway on the $100 billion merger of SABMiller (NASDAQOTH: SBMRY) with Anheuser-Busch InBev (NYSE: BUD), the risk of the deal getting blocked by a small group of ...
  10. Investing

    Britain Votes to Leave the European Union

    The British people have voted to leave the European Union.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center