Cumulative voting is a voting procedure used in the election of directors in some companies. The essence of cumulative voting is that each shareholder is entitled to cast a number of votes equal to the number of shares held by that shareholder times the number of directors to be elected, and the shareholder can spread those votes over the candidates however he or she wishes. Thus, if a shareholder has 100 shares and five director slots are to be elected, then the shareholder may cast a total of 500 votes. The shareholder may apply all 500 votes to one candidate, spread them equally among all candidates, or anything in between.
The rationale behind cumulative voting is that it gives minority shareholders the potential to elect some directors, rather than none. Under straight voting (the alternative to cumulative voting), a shareholder with 51% of the shares will always be able to elect 100% of the directors. In a company with cumulative voting, however, a shareholder with 49% of the shares will generally be able to elect at least one director, provided there are at least two directors. The ability of the minority shareholder to elect some directors increases as the number of directors to be elected grows.