CF_Chapter 15:

Slide 4:
Straight voting: directors are elected one at a time; each time, the
number of votes is not cumulated.
Cumulative voting: all directors are elected at one time; the number of
votes each shareholder can cast can be cumulated: = number of shares
the shareholder holds * the number of directors up for election.
Staggered voting: only a fraction of directors is up for election at a
particular time.
E.g. Peter has 20 shares, 4 directors are up for election.
With straight voting, Peter can cast the maximum of 20 votes for each
director.
With cumulative voting, Peter can cast the maximum of 80 votes for
one director because all directors are elected at the same time and
votes can be cumulated.

To guarantee that you get a seat on the Board of directors, you need
to have at least:
- Straight voting: (50% x number of shares outstanding) + 1 share
- Cumulative voting: [1/(N+1)] x number of shares outstanding + 1
share
N: the number of directors up for election
E.g. A company has 10,000 shares outstanding; 3 directors are up for
election. What’s the minimum number of shares you need to have to
guarantee that you get a seat on the Board of directors?
Straight voting: 5,001 shares
Cumulative voting: 2,501 shares

Slide 4:
- Proxy voting: When shareholders are absent at the meeting, they
grant the right to vote their shares to someone else.
- Classes of stock: Google has 2 classes of common stock:
 Class A: 1 share has 1 vote; class A is held by the public.
Class B: 1 share has 10 votes; class B is held by founders and
insiders  maintain the control of the company.
- Preemptive right (Rights offering): issue the rights to buy new
shares to existing shareholders to help them avoid ownership
dilution.

Slide 5:
Similarities between preferred stock and debt:
- Stated dividend
- Stated liquidating value
- Sometimes can be converted to common stock
Differences between preferred stock and debt:
- Preferred stock has no maturity date
- Dividends are not tax deductible
- Dividends are not the obligation of the company

Slide 7:
Sinking fund: an account managed by the bond trustee and used to
repay the bonds. Each year, the company transfers money to sinking
fund to retire the bonds.
Call provision: allows the issuing company to repurchase (buy back) the
bond any time prior to maturity at a specified price.
Protective covenant:
- Negative covenant: prohibits some actions, e.g., limits the amount
of dividends a company can pay.
- Positive covenant: specifies an action that the company needs to
take, e.g., requires the company to maintain a minimum level of
working capital.

Slide 16:
Example: Which one of the following is the Eurobond, which one is
the foreign bond?
1/ A French company issues a bond denominated in U.S. dollar to the
U.S. bond market
2/ A Japanese company issues a bond denominated in Japanese yen to
the bond markets in China, Mexico, Brazil, Canada, the U.S., Korea, etc.