Corporate stockholders and voting rights


Greg: Hi Tom, thank you. I wanted to pose a corporate question for you. Supposing there are four shareholders--

Attorney Tom Olsen: All right.

Greg: -and three of them hold 10% each in shares and the other holds 70%, it's hypothetical. Is there a difference in the voting, when a board votes, and they're all on a board of directors, do each of them get an equal vote, or does the 70% get something different?

Attorney Tom Olsen: Okay, so when you own stock in a corporation, you wear several hats. First and foremost; you are a shareholder, and let's assume that you are 70%, the shareholders elect the board of directors who are in charge of the big pitcher of the corporation. The board of directors elect their officers, like president who are in charge on a day-to-day basis, and the president hires the employees. So if you have four people on a board of directors, then they each have one equal vote. But let's say they don't vote the way you want them to vote. Then you, as a shareholder holding 70%, you kick them off as a board of directors and you put somebody else on that will vote your way. Does that make sense to you?

Greg: It does make sense, so let's just change that up a little bit. If it were three board members; 25%, 25% and 50%.

Attorney Tom Olsen: All right.

Greg: And the 25's get together and make a decision.

Attorney Tom Olsen: Right.

Greg: The problem is, it's kind of a stalemate at that point, I would assume.

Attorney Tom Olsen: It is. You would, so what happens in that situation is, is that no action is taken unless there's a majority. So if the 50% votes "yes", the two 25% vote "no", then no action taken.

Greg: So there would be an advantage to that person that has 50% to have 51%.

Attorney Tom Olsen: There you go. And that's a lot of people who think that way and that would absolutely be true, Greg.

Greg: That's it, that's all I need, thank you so much Tom.