Cumulative Voting
Cumulative Voting is a method of electing corporate directors that allows shareholders to concentrate all of their votes on a single candidate rather than spreading one vote per candidate per share, making it easier for minority shareholders to elect at least one board representative.
Under standard plurality voting, each share entitles the holder to one vote per director seat up for election, and each seat is won by the candidate receiving the most votes (even if the margin is one vote). In this system, a majority shareholder can effectively elect every seat on the board by voting their shares consistently across all candidates.
Under cumulative voting, the total votes available to each share equal the number of director seats being filled in that election. A shareholder can allocate all those votes to a single candidate, stack votes on a small number of candidates, or spread them evenly — according to their own judgment. This allows a minority bloc of shareholders who collectively hold more than 1/(n+1) of shares (where n is the number of seats) to guarantee the election of one director.
Cumulative voting was once mandatory in many US states, including California (for public companies of certain sizes), and remains mandatory in a smaller number of jurisdictions. Most large US public companies have eliminated it over time by reincorporating in Delaware, which makes cumulative voting optional. Corporate governance reformers have debated its benefits: cumulative voting clearly strengthens minority shareholder voice, but it can also introduce factionalism into the board if directors are elected by competing shareholder blocs with incompatible agendas.
Activist investors occasionally push for cumulative voting at targets where they hold a significant but non-majority stake, since it would improve their ability to seat their own nominees without winning a full proxy contest. Incumbent boards typically oppose the adoption of cumulative voting for the same reason.
Cumulative voting should not be confused with the voting mechanics of preferred stock, which has separate contractual voting rights that often include the ability to elect a subset of directors if dividends are in arrears.