Supermajority Voting
Supermajority Voting is a charter or bylaw provision that requires more than a simple majority — typically 66.7% or 80% of outstanding shares — to approve certain significant corporate actions, making it harder to override the board or existing power structures.
Supermajority provisions are a form of entrenchment mechanism found in the governance documents of many US public companies. They are most commonly applied to actions such as amending the certificate of incorporation or bylaws, approving a merger or acquisition above a certain size, removing directors without cause, or eliminating takeover defenses like the poison pill.
The rationale offered by proponents is stability and protection against short-term shareholder pressure. By requiring near-consensus to change fundamental corporate rules, supermajority requirements prevent a bare majority of shareholders — potentially representing short-term or activist interests — from forcing changes that may not serve long-term shareholders.
Governance advocates and institutional investors generally oppose supermajority provisions as entrenchment devices. ISS and Glass Lewis routinely recommend votes against directors at companies that maintain supermajority thresholds without justification, and they support shareholder proposals to eliminate them. A wave of governance improvements over the past 15 years has reduced the prevalence of supermajority provisions at large-cap US companies.
The interaction between a supermajority voting requirement and a dual-class share structure is particularly powerful for insiders. If a founder controls more than one-third of voting power through super-voting shares, a 66.7% threshold cannot be reached without the founder's support — effectively giving the founder veto rights over constitutional changes regardless of the preferences of all other shareholders combined.
Companies that reduce or eliminate supermajority provisions typically see a positive reaction from governance-focused shareholders and proxy advisory firms, potentially improving support for director candidates at the next annual meeting.