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CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process

A company has 5 board seats up for election. An investor owns 1,000 shares under a cumulative voting system. Compared with statutory voting, cumulative voting most likely allows the investor to:

Cumulative voting lets the investor concentrate all 5,000 votes (1,000 shares times 5 seats) on one candidate, which helps minority shareholders win board representation. Statutory voting instead caps votes per candidate at the number of shares held, here 1,000.

  1. Avote only on the first seat contested
  2. Bconcentrate all 5,000 votes on a single candidateCorrect
  3. Ccast no more than 1,000 votes for any one candidate

Explanation

Under cumulative voting, votes equal shares times seats (1,000 x 5 = 5,000) and may be allocated freely, including all to one candidate. This helps minority holders gain representation. Under statutory voting, the limit is 1,000 votes per candidate, which is option C's description.

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