Methods of Electing a Board of Directors

By Gabriel Peters

The board of directors offers valuable financial advice to a company, it helps in the decision-making process and assists in forging partnership with other shareholders and other companies. Electing individuals to these positions of governance entails a number of procedures and methods that depend on every company's policies.

Cumulative Voting

Cumulative voting is a method that allows minority shareholders to take place in the process of electing directors. Shareholders in a company hold a number of shares, which is multiplied by the number of directors to be elected. A shareholder can place all his votes for a nominee or he can split the votes among all other contestants. For example, a shareholder owns 200 shares and there are five directors to be elected, would have 1,000 votes to cast. The person with the most votes would be elected to the board.

General Consent Election Method

General consent election method is usually applicable where there is an overall agreement among stakeholders on the nominations presented by the board's nomination committee. As such, the election is virtually uncontested and all agree to elect the presented nominees to the board. General consent method does not mean that all shareholders agree without objection; however, it means that a majority of those present agree with the nominations.

Plurality Voting

Plurality voting is one of the most widely used methods of electing directors. Here the number of affirmative votes is used to elect directors to the board. The nominees who receive the most 'for' votes are elected to the post regardless of the total number of shares voted. For example, if there are 300 people who are voting and 200 voted to withhold their vote for a certain nominee and 100 voted in the affirmative for a nominee then the nominee would have won the directorship.

Majority Voting

The majority method is also widely used in filing directorship posts. In this method the nominee is required to receive majority votes in his support. The majority method policies are seen by shareholders and companies as a more democratic method of election compared to plurality voting and other methods. It is also argued that this method encourages boards of directors to demonstrate more accountability to shareholders.

About the Author

Gabriel Peters' interest in writing began in 1996 after leaving Canada to study in Great Britain. His articles for the weekly “Sunday Times” of Brisbane Eastern Australia have been hailed as "refreshing and insightful." He completed his Bachelor of Arts (Hons) in international journalism in 2001 at Birmingham University.