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Is It True That Only When in Majority Voting Can Common Stockholders Assign a Proxy?

Original post by Erika Johansen of Demand Media

Common shareholders have the right to assign a proxy in any voting situation, unless the rules of the company issuing the shares somehow limit that ability. While cumulative voting does present a different system than majority voting, proxy assignment can still be used. This with questions about a specific company's voting rules should seek legal advice.

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Proxy Assignment

In a typical company, the common shareholders have the right to vote for members of the board of the directors. However, the default law gives the shareholder the right to assign his vote to another party, known as a proxy. This proxy then has the right to vote the shareholder's vote for him, in a manner directed by the shareholder. Shareholders use proxies for many reasons, including aggregating their votes with others, or even the simple reason that they don't feel like attending the vote themselves.

Majority Voting

Majority voting is the default rule in most corporations, and the simplest procedure. In a majority vote, each common shareholder has the right to cast one vote for each share of stock he owns, for each of the director's positions. The shareholder's voting power amounts to one vote per share per number of directors being elected at a given shareholder meeting. When a shareholder assigns a proxy, therefore, the proxy simply casts the shareholder's vote for him for each director.

Cumulative Voting

Cumulative voting is more complicated. In a cumulative vote, each shareholder may take the one vote per director per each share of stock he owns, and combine all of his total votes together to put them behind one or more director candidates. This ability to aggregate votes often allows shareholders in the minority to combine and elect at least one director who will support their views. Majority voting, by contrast, typically allows the majority shareholder to carry great weight in choosing every single director elected to the board. In cumulative voting, however, a common shareholder may still delegate his aggregated voting power to a proxy, if he chooses.

Special Rules

Every corporation has fairly broad latitude in constructing its own voting rules. Corporations typically have articles of incorporation and bylaws, both of which may set forth the voting procedures and requirements for common shareholders. Shareholders who wish to ascertain their voting rights, including the right to assign a proxy, in a specific corporate vote, can usually find out what they wish to know in these corporate documents.


                   

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About the Author

Erika Johansen is a lifelong writer with a Master of Fine Arts from the Iowa Writers' Workshop and editorial experience in scholastic publication. She has written articles for various websites.


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