Supermajority

A supermajority is an amendment to a company's corporate charter that requires a large majority of shareholders (generally 67%-90%) to approve important changes like mergers.

This is sometimes called a "supermajority amendment." Often a company's charter will simply call for a majority (more than 50%) to make these types of decisions. A supermajority is also frequently used in politics, required for passing certain laws.

Supermajorities date back to discussions among juries in classical Rome. The medieval church later adopted a two-thirds supermajority rule for its own elections. Despite Pope John Paul II's attempt to change this in 1996, the supermajority rule for electing a pope still exists. Requiring a supermajority of stakeholders to vote on a corporate issue makes it far more difficult to reach a decision and move forward; however, those issues that do make it through such an intense dialogue pass with far more support and could ultimately be more sustainable long-term, given that more team members are in favor of its success.  

Examples of critical issues that might require a supermajority vote include: a merger or acquisition, executive changes (including the hiring or firing of a CEO), the decision to hire an investment bank to go public (or, in reverse, to leave the public markets and go private). A major corporate decision that does not require a vote is the declaration of dividends, which the Board of Directors (BOD) of a company decides on independently. However, most other important decisions that affect the direction a company will take are subject to a vote.

A supermajority of voters is usually counted at a company’s shareholder meeting. This can be an annual meeting or a non-regular meeting throughout the year, depending on the nature and urgency of the matter being voted upon. Shareholder meetings are generally administrative sessions that follow a specific format that is decided in advance. The format is usually a parliamentary procedure, with specific time allocated for each speaker and protocol for shareholders who wish to make statements.

A corporate secretary, attorney or other official often presides over the process. At the conclusion of the meeting, the minutes are formally recorded.

In May 2018, Duke Energy (NYSE: DUK) issued a statement noting that a binding company-sponsored proposal was not approved after it did not achieve the required 80 percent of total outstanding shares. The proposed amendment was to to eliminate supermajority voting requirements in Duke’s Restated Certificate of Incorporation of Duke Energy Corporation.