Quick facts
- Delaware default: plurality, under 8 Del. C. § 216
- Majority voting is adopted, not automatic
- Where it lives: the certificate of incorporation or the bylaws
- Usual scope: uncontested elections only
- The catch: a defeated director does not automatically leave
Majority voting requires a director candidate to receive more votes in favour than against in order to be elected. It sounds like the obvious way to run an election. It is not the default, and the default is stranger than most people expect.
In plain English
Under plurality voting, the candidates with the most votes win the available seats. In an uncontested election, where there is exactly one nominee per seat, that means the nominee wins by receiving a single vote in favour. Ninety-nine percent of shareholders can decline to support them and they still take the seat, because nobody else is running.
Majority voting closes that gap. A candidate who cannot attract more support than opposition does not get elected.
What Delaware actually provides
Section 216 sets defaults and lets companies override them. A corporation's "certificate of incorporation or bylaws" may specify the quorum and "the votes that shall be necessary for the transaction of any business." Absent that specification, the statute supplies its own rules, and for board elections the default is explicit: "Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors."1
So majority voting is something a company opts into. Plurality is what you get by saying nothing.
The provision worth knowing about
Section 216 contains a sentence that changes the balance of power over this choice: "A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the board of directors."1
Ordinarily a board with bylaw-amendment power can undo what shareholders adopt. Not here. If shareholders enact a majority voting standard by bylaw, the board cannot quietly reverse it. That is why majority voting spread through shareholder-proposed bylaws rather than board initiative.
Withhold, against, and why the distinction exists
On a proxy card you may see "for" and "withhold," or "for," "against" and "abstain." The difference is not cosmetic.
The federal proxy rules require a proxy form for director elections to give security holders a means to "withhold authority to vote" for nominees, or, "when applicable state law gives legal effect to votes cast against a nominee," a means to vote against them and a means to abstain.3
Read that conditional carefully. An "against" vote appears when state law makes it mean something. Under plurality it does not, so the card offers "withhold," which is a recorded expression of disapproval with no effect on the outcome. Adopting majority voting is what converts disapproval into consequence.
The failed election, and why the director often stays
Here is the part that surprises people. A director who fails to win a majority is not automatically off the board.
Delaware provides that "each director shall hold office until such director's successor is elected and qualified or until such director's earlier resignation or removal."2 If nobody was elected to the seat, there is no successor, so the incumbent holds over.
Companies handle this with contingent resignation policies: nominees submit a resignation in advance that becomes operative only if they fail to win a majority and the board accepts it. The board keeps discretion over whether to accept.
The result is a standard with real teeth and a soft landing. A defeated director has been publicly rejected by the owners of the company, which is not a comfortable position, but their departure is a board decision rather than an automatic consequence.
Contested elections usually revert to plurality
Most majority voting standards apply only when the number of nominees matches the number of seats. When there are more candidates than seats, the standard reverts to plurality.
The reason is practical. In a genuine contest, several candidates may fail to clear 50% while seats sit empty, producing a board that cannot be filled by the election that was meant to fill it. Plurality always produces a winner, which in a contested election is the more useful property.
What this means for a private company
Your company almost certainly elects directors by agreement rather than by counting votes. Board seats are allocated in the financing documents: one for the lead investor, one or two for the founders, an independent seat the parties select together.
The transferable question is the same one this page is really about: what happens to a director nobody wants to keep? In a public company that is a voting standard. In yours it is a removal provision, and it will be in the voting agreement rather than the charter. Find out who can remove which seat, and whether your own seat is one of them.
Related reading
- Cumulative Voting covers the rule that helps minorities win a seat rather than defeat a candidate
- Staggered Board covers how often these elections happen at all
- Proxy Fight covers what a contested election looks like
- Say-on-Pay covers the other shareholder vote with advisory force