Supermajority - Explained
What is a Supermajority?
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What is a Supermajority?
A supermajority refers to a change made to the corporate charter of an organization that seeks voting of around 67% to 90% shareholders in its favor. Supermajority is also known as a supermajority amendment. In case, there are at least 50% shareholders supporting charter, the related decision will be implemented. Political parties use a supermajority during the enforcement of specific rules and policies.
How Does a Supermajority Work?
Supermajorities were a result of in-depth conversations among judges in classical Rome. Later, the primitive church followed a policy of 67% supermajority at the time of casting a vote during elections. Though Pope John Paul II tried to modify this rule in the year 1996, but it still remains in existence for conducting popes elections. If an organization matter requires a supermajority of stakeholders such as shareholders, management, etc. for arriving at a crucial decision, then it may become to arrive at a specific solution. However, these matters can be resolved with the help of a dialogue pass that is supported by many members, resulting in more feasibility in the long-run. In the corporate world, significant issues like mergers, acquisitions, changes made at the executive level, the conversion of a private bank into a public bank, and vice-versa, etc. have the requirement of a supermajority voting. However, there are certain decisions that don't require a supermajority vote, and can be taken at the discretion of the organizations Board of Directors. Such decisions include declaring dividends to shareholders.
Supermajorities and Voting Shareholders
Most of the times, a supermajority voting takes place in the shareholder meeting held by a company. Based on how crucial the matter is or how quickly the decision needs to be made, such meetings can take place once in a year, or at frequent intervals during the whole year. Shareholder meetings tend to be management sessions that have a pre-decided and particular format to follow. The format revolves around a parliamentary process where every speaker gets a time limit for presenting his or her thoughts on the topic, as well as a protocol to follow for sharing their views. These meetings are usually led by an official secretary, attorney, or any other officer. When the formal proceedings end, they record the minutes in a formal manner. Last year in May, Duke Energy made a statement saying that one of the company's proposals was not passed because of not accomplishing the 80% target of outstanding shares. Their proposal was to abolish the idea of supermajority voting in the Restated Certificate of Incorporation of Duke Energy Corporation in Duke.
- Corporate Governance Law (Intro)
- What is Business Governance?
- Berle-Means Thesis
- Corporate Governance Rating Definition
- Who are the members of a corporation?
- Corporate Charter
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- Close Corporation Plan Definition
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- Shareholder-Centric Perspective
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What is the Stakeholder theory of corporate governance?
What is the role & rights of Shareholders in the corporation?
- Shareholder Democracy Definition
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- Information Circular
- Straight and Cumulative Voting
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- Class Voting Shareholders
- Changing the Voting Rules
- Supermajority (Voting)
- Shareholder Sponsored Proposal
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- Stock Split
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- Appraisal Rights
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