More legal mumbo jumbo. This is a concept that allows shareholders and/or government agencies to bring legal action against corporate bigwigs (mainly members of the Board of Directors and C-Level execs) for wrongdoing.
If Jack & Jill are the Chairman & CEO, respectively, of publicly-traded Sherpas Unlimited, Inc. (Ticker: HIL), their fiduciary duty is to maximize profits (and, therefore, shareholder value) by executing the corporate strategy of helping clients carry their belongings to the tops of mountains. If, after a traumatic fall, they decide to no longer fulfill their duties, and knowingly hire a yodeling sherpa who consistently leads clients over the edge of mountains and into injurious situations...and HIL's stock price falls off a cliff...adverse domination would allow for Jack & Jill to be held legally liable for any financial damage done to shareholders.
Also a Fifty Shades thing but, um, we won't go there.
Related or Semi-related Video
Finance: What is Cumulative Voting?6 Views
Finance, a la shmoop. What is cumulative voting? All right people there are two
flavors of voting in the land of common stock, there's cumulative and statutory. [Two ice cream cones held next to each other]
Cumulative voting just somehow sounds cooler, doesn't it? It allows teams to [Guy points at the ice cream cone and drops it]
join forces and pool their votes cumulatively
for target candidates to get elected that is it allows for the disaggregation,
$5 word there, of board members when voting. That is if a shareholder has one [5 dollar price tag appears]
percent of the common shares outstanding of a company and cumulative voting is [Pie chart showing the small 1% holding]
allowed and there are five candidates being elected, well that shareholder can
vote effectively five percent of their total shares voteable for just one
candidate. Said graphically with blood and guts it looks like this. Cumulative [Table showing shares equalling number of votes per candidate]
voting helps the little guy to have a big presence, with only 1% of the shares [Kid sat at a shareholder meeting]
the little guy can be felt as a 5% holder which makes you know him or her a [Kid jumping to hit a Mario coin box]
relatively major player. It also encourages boards to rotate seats [People swapping seats in the boardroom]
gradually, that is if there were seven seats coming up for election while that
1% could feel like 7% which starts to get dangerous in a contentious board and [The people in the boardroom start fighting]
company situation. You can imagine someone who only owns a small part of
the shares outstanding could elect a whole lot of board. Yeah that'd be a [Wooden boards replace the people in suits]
little scary. Well, score one for the little guy... [Kid laughing will an evil face]
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