What does 'Supermajority' mean

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.

BREAKING DOWN 'Supermajority'

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.

Supermajorities and Voting Shareholders

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.

RELATED TERMS
  1. Voting Shares

    When stockholders have the right to vote on matters of corporate ...
  2. Control

    Control refers to having sufficient amount of voting shares of ...
  3. Proxy Vote

    A proxy vote is a ballot cast by one person or firm on behalf ...
  4. Voting Poison Pill Plan

    An anti-takeover strategy in which the company being targeted ...
  5. Voting Trust

    A voting trust is a legal trust created to combine the voting ...
  6. Amendment

    An amendment is a change to the terms of a contract, government ...
Related Articles
  1. Investing

    A Peek Into Shareholder Meetings

    Shareholder meetings can be glamorous, exciting or controversial, but not particularly revelatory.
  2. Investing

    How Your Vote Can Change Corporate Policy

    Shareholders are getting a bigger say in how companies are run. Find out how you can be heard.
  3. Investing

    Long-Term Outlook For Duke Energy

    Learn why Duke Energy is showing both positive and negative signs for long-term investors, and understand how an interest rate increase may impact the company.
  4. Investing

    Know your shareholder rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company. Read on to learn what rights you have as a shareholder.
  5. Managing Wealth

    Executive Pay: How Much Do Shareholders Really Care?

    How much do shareholders - or the public - really care about executive pay? A new SEC proposal may be aimed at finding out.
  6. Investing

    Charter and TWC Receive FTC Merger Approval (CHTR, TWC)

    While the FTC has given its green light, the deal must still be approved by the California Public Utilities Commission, which will vote on the deal May 12.
  7. Investing

    Brexit: Are the Rich Getting Sick of the Poor - and vice-versa?

    The decision to leave the EU underscored the growing gap between the wealthy and everyone else.
  8. Tech

    How Blockchain Technology Can Prevent Voter Fraud

    As a technology, blockchain is quickly becoming unrivaled. One of the biggest problems that blockchain’s decentralized muscle can solve is voter fraud.
  9. Investing

    The Elon Musk Merger Is Approved (SCTY, TSLA)

    Shareholders of SolarCity Corp. and Tesla Motors voted to approve a merger between the two companies. Here is what CEO Elon Musk plans to do next.
RELATED FAQS
  1. How does a merger affect the shareholders?

    Explore the impact of a merger and understand how the process affects shareholders of the newly merged firm in terms of stock ... Read Answer >>
  2. How does privatization affect a company's shareholders?

    Shareholders of a public company can benefit if the company is taken private at a premium to where they own the shares. Read Answer >>
  3. What is the difference between Class A shares and other common shares of company's ...

    Discover how a company can break down its common stock into multiple classes and how these classes differ from one another ... Read Answer >>
  4. How Do Proxy Fights Work?

    A proxy fight is when a group of shareholders are persuaded to join forces to win a corporate vote. Read Answer >>
  5. Is a private company required to show financial information?

    Understand whether a private company is required to disclose financial information to the public. Learn what is required ... Read Answer >>
Trading Center