5 ways to vote, plus how to set a supermajority.
we’ve established that voting is overrated and that most firms rarely vote.
more: why voting isn’t such a big deal | why and how new partners buy in | a crash course in partner retirement/buyout plans | protect your business with a solid partner agreement
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sometimes, though, it’s necessary. but how?
there are several ways firms can take formal votes:
- one person, one vote on all matters. majority rules. self-explanatory. most firms stop short of this because they feel that certain matters are so important that they should be decided by a higher percentage than majority rules. so they opt for ..
- one person, one vote on most matters, with a supermajority vote required on a few critically important issues. see the left-hand column of the chart “voting decision grid” below. most firms use supermajority percentages between 67 percent and 80 percent. it all depends on what the partners want.
- unanimous decisions required to pass a vote. this may be appropriate for firms with two or three partners. beyond that, requiring a unanimous vote means that one person can prevent a very worthwhile and beneficial decision. this may give too much power to a dissenting partner.
- always based on ownership percentage. voting on the basis of ownership percentage essentially disenfranchises low-ownership partners, many of whom are relatively new partners. they feel that their opinion has no impact on the outcome of the vote because the high-ownership partners get their way without the support of other partners. some firms are concerned about placing too much power in the hands of the majority owners. but …
- special protection for the founders and/or major producers is often needed. a valid concern with one-person, one-vote is that the “power partners” (founders, rainmakers, high-ownership partners and the most productive partners) can be unjustly overruled and outvoted by a large block of minority owners and/or low-production partners. power partners could:
- be ousted from their positions (mp, member of executive committee ec, etc.)
- have their compensation unfairly reduced
- be unfairly expelled from the firm
- be powerless to block major decisions such as changing the partnership agreement, terminating and admitting partners, entering into mergers, and leasing offices
the way to resolve this is not to conduct all votes by ownership percentage. here are three workable alternatives:
- require a supermajority vote on certain critical issues.
- if one vote-one person votes are taken on a critical issue, any partner can request that voting be done by ownership percentage.
- in certain situations, the partnership agreement can have specific wording that requires the vote of a certain power partner or group of partners to pass.
the chart below details the decision-making authorities of the firm and the type of votes often required to make a decision:
voting decision grid
deciding on the supermajority percentage
some of you reading this may think, “finally, he’s telling us what to do!”
first, it’s important to understand that every firm is different. what’s right for one firm may not be right for another.
second, the chart below is what i recommend, based on seeing this at firms i have worked with.
what a firm really has to decide is this: how many dissenting partners are you willing to allow to prevent the passage of a vote that the majority favors?
as you can see from the chart, if a firm has two or three partners, it should require a unanimous vote to pass a motion. once the firm has four or more partners, a majority vote should be sufficient to pass a decision.
how to set the supermajority percentage
here is a practical nuance of the supermajority vote conundrum. it applies mainly to firms with a relatively small number of partners, perhaps five or six. if a firm has an important issue to vote on (a merger or someone’s promotion to partner) and one or two partners are holding back a strong majority, the firm has a bigger problem: are the partners who want to pass the issue willing to continue being partners with the dissenters? and the flip side as well: do the dissenters want to continue being partners with the partners who voted in the majority? not an easy situation to resolve.
teamwork is one of the hallmarks of the one-firm concept. teamwork by the dissenting partner(s) might look like this: “if the vast majority of my partners want to pass a motion, can i find it within myself to simply agree to disagree and not hold back the majority?”