Cumulative Voting system – How does it protect Minority interests?

Have you read the recent news about a not-so-common election system (Cumulative voting) introduced in a village of NY? If not, read the details here -

http://news.yahoo.com/s/ap/20091106/ap_on_re_us/us_voting_rights_lawsuit

When I first read this news, the question I had was - What is cumulative voting and how does it really help minorities (Hispanics in this news article)? So, decided to examine the “cumulative voting” system more closely and see why is it specifically preferred for minorities (Be it in social situations or in corporate world).

I will take a corporate business scenario and demonstrate how cumulative voting is preferred to protect minority shareholders’ interests.

Assume, Alice owns 105 shares and Brett owns the other 300 shares of a company - SDA Inc., And SDA Inc’s articles of incorporation stipulate straight voting for the election of three (3) director positions it has on its board. Every share holder gets 1 vote per share per each director position. So, Alice will get 105 votes each for every director position and Brett gets 300 votes each for every director position.

There are 6 people (A, B, C, X, Y & Z) contesting for those 3 open director positions (so the top 3 candidates with the highest votes will be elected).

Alice’s preferred candidates: A,B & C

Brett’s preferred candidates: X,Y & Z

Now, If SDA Inc’s articles of incorporation stipulate straight voting for the election of directors, the result looks as below:

NOTE: Under straight voting, candidates have a cap for maximum number of votes they can cast for each director position. (i.e., Alice cannot vote more than 105 to any one contestant. Same way, Brett can’t cross 300 votes to one contestant).

Result? As you can see from the above table, all three of the candidates preferred by Brett got in the top 3 spots & hence won the three director positions. What do you think of this result? Well, in one way, this may look very “fair” for because Brett has the majority of share in the company.But, when we think from Alice’s perspective – she (“the minority”) in this case, does NOT have any representation on the company’s board! (All her preferred people A, B&C lost the election). That most likely leaves Alice with a feeling of being neglected in all the future decisions being taken by the company’s board and most importantly, she may not have an option to voice her concerns, no matter how critical those are. This scenario would have even much serious implications when applied in the social context (a section of the society being neglected & not being part of the decision making – Just as explained in the above referred news article).

Cumulative voting system helps us resolve this issue. Under Cumulative voting system, a person can cast all his/her cumulative votes to one person (NO “one vote per director position” restriction). Let’s go back to our prior example & see how the result would change if SDA Inc’s articles of incorporation stipulate Cumulative voting for the election of three (3) director positions

As you can see, now Alice has a choice of casting all her cumulative votes (3 * 105 = 315) to just one candidate and make sure at least of her preferred people get elected into the board. In this scenario, no matter how Brett splits & combines his votes, he can’t get more than 2 director positions for his preferred candidates.

That explains why the federal judge in the previous news article imposed the cumulative voting system to make sure there is Hispanic representation for the village – Port Chester.