[nitpick]Most of the problems cited have to do with the acquisition of the shares, not the concept of control once they are bought. But yes, there is more to taking over Microsoft than simply writing a cheque for umpteen billion dollars.[/nitpick]
This is not true. You own 51% of the votes and you control the board. If someone has 25% of the remaining stock, it would be wise to put him on the board, unless you want trouble. Billy Rose owned 3% of AT&T back in the 60’s and he was on the board, because he owned more stock than anyone else. Ross Perot sold his company to General Motors for GM stock. He didn’t have 51%, but they had to put him on the board. He caused so much trouble that they bought him out in cash.
Aw, c’mon, let’s explain cumulative voting!
Cumulative voting is an alternative to straight voting. In a straight voting system, each share gets one vote for each director position, and a shareholder may vote once per share for each open position. In that system, someone owning more than 50% of the shares can elect whoever s/he wants to every position.
Cumulative voting is the alternative, and it works like this: each share has a number of votes equal to the number of directors to be elected, but those votes can be “pooled” into a single election, or spread among the elections however the shareholder wishes. Here’s the magic formula:
x = [(s *d)/(D+1)] +1
where x is the number of shares required to elect directors, s is the number of shares represented at the meeting, d is the number of directors it is desired to direct, and D is the total number of director positions to be elected.
Example: suppose there are 1000 shares at a meeting at which 4 directors are to be elected. To elect one director, a minority group would need to gather 201 shares. With that number of shares, the group would have 804 votes, all of which could be case for one candidate. The remaining shares would have 3196 votes, or 799 for each candidate. Thus, the minority is assured of electing one director, with only about 20% of the represented shares.
Funky, ain’t it?
Pardon me, that should be “all of which could be cast for one candidate.”