The cumulative method allows those who do not own many shares to have as many votes as there are seats to be filled. Shareholders can cast all their votes for one candidate or distribute their votes among several. For example, if five directors were to be elected, an owner of 30 shares of stock with the cumulative voting right would have 150 votes that they could cast for one director or spread among the five directors. If the company offers a new issue of stock to the public, shareholders are accorded the right to buy new shares to keep their percentage of ownership the same. With preemptive rights, they can maintain voting control, share of earnings and share of assets.
Preemptive rights let common shareholders buy new shares of stock before non-stockholders.
Thus, these rights assure the keeping of previous percentages of ownership. They must be exercised within 45 days. If they are not, the company may sell the stock to non-shareholders. They also have the right to sue the management for any unauthorized activities. They have the privilege of receiving dividends as cash, stock or property.