Statutory Voting – Definition

Cite this article as:"Statutory Voting – Definition," in The Business Professor, updated April 24, 2019, last accessed May 26, 2020, https://thebusinessprofessor.com/lesson/statutory-voting-definition/.

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Statutory Voting Definition

A corporate voting procedure where each shareholder gets to cast one vote per share for each candidate up for election is called ‘Statutory Voting’ or ‘Straight Voting’.

For e.g., if you owned 100 shares of a firm, and there were 4 candidates being polled for the position of Board Member, you would be able to cast 100 votes for each of the 4 candidates, taking your total voting tally to 400. You cannot however, cast 300 votes for one candidate and 100 for another, the votes are divided evenly amongst all the candidates as per Statutory Voting rules.

A Little More on What is Statutory Voting

Unlike Cumulative Voting that allows shareholders to vote in favour of a candidate(s) of their choice while increasing the minority shareholders stakes in influencing the decision, Statutory Voting reduces the impact of shareholder voting by making for an even split in the number of votes cast.

In the Cumulative Voting scenario, if you own a 100 shares of the firm and there are 4 candidates standing for election to the company Board, you can cast 400 votes for the candidate of your choice and none for the others. You can also choose to split your votes in any permutation or combination imaginable. For e.g., you can cast 25, 50, 75, and 250 votes for each of these candidates.

Shareholders need to consult the “Stockholder Agreement’ document to learn whether a corporate follows Cumulative Voting or Statutory Voting procedure.

References for Statutory Voting

Academic Research on Statutory Voting

Constitutional and Statutory Voting Rights for People with Disabilities, Waterstone, M. (2003). Stan. L. & Pol’y Rev., 14, 353. This paper sheds light on the Statutory and Constitutional voting rights of people with disabilities.

The Liability of Limited Partners Having Certain Statutory Voting Rights Affecting the Basic Structure of the Partnership, Augustine, D., Fass, P. M., Lester, M. N., & Robinson, J. F. (1976). The Business Lawyer, 2087-2107. This paper looks at Statutory Voting rights in limited partnerships and their adverse impact on the sanctity of the voting procedure.

Voting Rights and the Statutory Constitution, Shane, P. M. (1993). Law & Contemp. Probs., 56, 243. This paper presents the relationship between voting rights and the state laws that govern them.

Optimal voting procedures for profit maximizing firms, Nitzan, S., & Procaccia, U. (1986). Public Choice, 51(2), 191-208. This paper takes a look at the different corporate voting procedures and tries to arrive at an optimal voting procedure to maximize profits.

Section 5: Growth or Demise of Statutory Voting Rights, Yoste Jr, H. M. (1977). Miss. LJ, 48, 818. This paper presents an overview of Statutory Voting rights, their rise, implications, demise, and more.

A Note on” Statutory Interpretation”, Landis, J. M. (1930). Harvard Law Review, 43(6), 886-893. This paper looks at the reading and interpretation practices of state laws.

Nonbinding voting for shareholder proposals, Levit, D., & Malenko, N. (2011). The Journal of Finance, 66(5), 1579-1614. This paper takes a look at shareholder proposals in light of nonbinding voting procedures.

The Control and Conflict of Interest Voting Systems, Dallas, L. L. (1992). NCL Rev., 71, 1. This paper takes a look at the different voting systems adopted by firms and the inherent conflicts of interest arising out of these procedures.

Social conceptions of the corporation: Insights from the history of shareholder voting rights, Dunlavy, C. A. (2006). Wash. & Lee L. Rev., 63, 1347. This paper presents insights on the historical influence of voting rights and social concepts in corporations.

The demand for corporate law: statutory flexibility, judicial quality, or takeover protection?, Kahan, M. (2006). Journal of Law, Economics, and Organization, 22(2), 340-365. This study presents empirical evidence for flexible corporate laws.

Voting Trusts, Their Abuses and Regulation, Ballantine, H. W. (1942). Tex. L. Rev., 21, 139.

Cumulative voting: The value of minority shareholder voting rights, Bhagat, S., & Brickley, J. A. (1984). The Journal of Law and Economics, 27(2), 339-365. This paper takes a look at the influence of minority voters in a Cumulative Voting procedure.

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