Cumulative Voting
A method of voting in director elections that gives each shareholder votes equal to shares held multiplied by directors to be elected, with all votes castable for a single candidate or distributed. Enables minority shareholders to elect at least one director when their stake is sufficient.
Cumulative voting is a method of voting in director elections that gives each shareholder a number of votes equal to the number of shares held multiplied by the number of directors to be elected, with all such votes castable for a single candidate or distributed among multiple candidates. It enables minority shareholders to elect at least one director when their ownership stake is sufficient to overcome the relevant mathematical threshold.
Texas default
Texas is an opt-in cumulative-voting state. Under § 21.360, shareholders do not have the right to cumulate their votes unless the certificate of formation expressly provides for cumulative voting. This is the opposite of older statutes that imposed cumulative voting by default.
Calculation example
A shareholder holding 100 shares in an election of three directors has 300 votes under cumulative voting, which may be cast 300-for-one or distributed 100-100-100. Under standard plurality voting, the same shareholder has 100 votes per director seat.
Notice requirement
Under § 21.361, where cumulative voting is authorized, a shareholder must provide written notice to the corporation's secretary at least one day before the meeting of the shareholder's intent to cumulate votes.
Cumulative voting is rarely adopted in modern Texas corporations. Closely-held corporations typically prefer the predictability of straight plurality voting; venture-backed corporations achieve minority-board representation through class-voting structures rather than cumulative voting.
Companion article: Raising Capital in Texas