‘Succession’ Shows the Strengths – and Weaknesses – of Supermajority Voting Requirements in Corporate Governance

Money, power, and… corporate governance? Succession has captivated audiences with its soap opera-like boardroom battles, never-saw-that-coming backstabbing, and power-hungry corporate negotiations. Power struggles, family dynamics, and corporate law combine to create tension and explosive outcomes.

At the end of season three of Succession, we saw each of these factors come into play when the Roy siblings attempted to wield the power of the supermajority to block a sale of the publicly-traded and family-owned company, “Waystar Royco.” Though the sibling takeover did not work out as intended, supermajority voting requirements are standard corporate governance tools often used to help companies make high-stakes decisions.

Corporate charters often require a simple majority of 50.1% for most decisions, however, it is not uncommon for companies to require a supermajority for certain major actions. A supermajority is anything over 50.1%, though some companies may set the supermajority at two-thirds or even 90%.

As we saw at the end of season three of Succession, a supermajority often comes into play when a group of shareholders wants to block the sale of the company. However, a supermajority can be required for other major decisions, such as spinning off a business segment, hiring or firing executives, or incurring indebtedness over a threshold amount.

Much like Logan Roy, the founder of Waystar Royco and patriarch of the Roy family in Succession, supermajority voting requirements are powerful but not without weaknesses and vulnerabilities. Here we explain some advantages and disadvantages of including supermajority voting requirements in your company’s bylaws or other corporate governance documents.

Advantages of Supermajority Requirements

• Decisions that meet supermajority voting requirements have more consensus, making them more sustainable. The support of a majority of the shareholders can impact the overall success of a decision – whether it’s a sale of the company, hiring a new CEO, or acquiring a new company. By requiring a higher percentage shareholders to agree to a decision, a company can reduce the likelihood of dissension if a decision passes by a narrow simple majority.
• Obtaining a supermajority vote requires thoughtful discussion among the shareholders. Arriving at a decision that is satisfactory to a larger group of people often requires more detailed communications and discussions between the parties. A supermajority requirement may encourage shareholders to engage in more focused deliberations regarding the decision at hand.

Disadvantages of Supermajority Requirements

• Decision-making can be difficult and more time-consuming. Although a supermajority can force shareholders to engage in thoughtful and strategic deliberations regarding a decision, it can also slow down the process. For this reason, a supermajority requirement may not be an appropriate approval requirement for decisions that require prompt action.
• It can allow a small group of shareholders to control the majority. Because a supermajority requires the agreement of more than 50.1%, a small number of shareholders who control the majority of the shares can hoard the decision-making power and, in turn, control the remaining shareholders. This can be especially detrimental if there are preexisting tensions between the shareholders of a company.

Although Succession is a fictitious show involving a fake company and a fictional family, the corporate issues that impact Waystar Royco and the Roy family are legitimate. Corporate governance issues like supermajority voting requirements impact companies and their shareholders. Businesses should consider supermajority voting requirements and other corporate governance issues carefully, seeking the advice of legal counsel as necessary.

If you have questions about corporate governance issues – or want to talk about the latest episode of Succession – don’t hesitate to reach out.