Shareholder Governance

For technical documentation, see MezzGovernor, StartupGovernor, ShareClassGovernor, and LateStageGovernor

Introduction to Shareholder Governance

Shareholder governance is predicated on shareholder supremacy, meaning that shareholders should hold ultimate control of a company. Simultaneously, shareholder governance assumes that most shareholders are relatively naive and uninvolved, so it limits their required participation to a handful of key decisions. Most day-to-day responsibilities are delegated to the board of directors.

Shareholder governance is responsible for a few primary actions:

  • Managing an organization's board of directors

  • Changing the shareholder governance structure

  • Authorizing new shares

  • Approving liquidation or acquisition

Governance Modularity

Shareholder governance in Mezzanine is modular. Mezzanine companies can actively switch between different types of governance to best suit their needs. For instance, a small startup may desire a governance system that is simple and enables quick execution. As this company grows and receives more equity financing, it may subsequently switch to a governance system that better empowers decentralized shareholders.

Multiple governance modules provides organizational flexibility. One size does not fit all. Future versions of the protocol may provide additional or improved versions of these modules.

There are currently three governance modules for companies to choose from, each detailed in the sections below:

In Mezzanine, proposals in shareholder governance are executable transactions. If a proposal passes, the transaction(s) can subsequently be executed by anyone. This type of governance is similar to that of Compound and differs from those similar to Snapshot. Snapshot uses on-chain events, which are used to index data from a blockchain, to immutably record votes on proposals. However, the actual execution of a proposal in Snapshot must take place via a trusted party, such as a DAO's multi-signature wallet.

In contrast, the execution of a proposal in Mezzanine is trustless: anyone can execute the intended actions of proposals. While the trustless execution of proposals is a more decentralized governance system, it requires that shareholders be highly cognizant of malicious proposals.

Startup Governance

The simplest system of governance in Mezzanine is aptly named Startup Governance. It is most suitable for early-stage startups. This system is extremely simple: the board of directors, itself, acts as the governance system. It does not ever require shareholder approval.

The board of directors will be able to add new members, remove members, swap members, change their multi-signature wallet's threshold, and authorize shares at their discretion.

However, each of these actions requires a supermajority of the board to approve, which may be lower or higher than the threshold. A super majority is defined as two-thirds of the board of directors rounded upwards:

Number of Board MembersSuper Majority













A supermajority of the board can also approve an upgrade in governance to Late Stage or Share Class Governance.

Late Stage Governance

Late stage governance more closely resembles DAO governance. The shareholders exert an enormous amount of checks and balances over the board of directors. This comes at the cost of speed. It should be used by large, decentralized organizations that do not require rapid actions.

Shareholders select/remove board members, approve governance changes, and approve changes to the capital structure, such as dilution, liquidation, or acquisition.


There are three different types of votes in late-stage governance:

Vote TypeDescription


Counts for the execution of the proposal


Counts against the execution of the proposal


Does not count towards the proposal

For a proposal to pass, the number of for votes must be greater than the number of against votes. Once a delegate or shareholder casts their vote, their vote is immutable and cannot be changed to a different vote type. Therefore, delegates and shareholders should heavily consider their decision before voting.

There are four important elements to late-stage governance in Mezzanine:

  1. Proposal Threshold Percentage: the minimum number of votes needed by an account to create a proposal. The number of votes is inclusive of all share classes and vesting shares.

  2. Quorum Percentage: the minimum number of for votes required for a proposal to pass

  3. Voting Period: The period in which shareholders can vote on a proposal

  4. Voting Delay: The period in which shareholders can review a proposal and gather votes. Once the voting delay has passed, any new votes gained by an account cannot be used towards the proposal. For example, if a voting delay ends at noon and Alice acquires 1,000,000 common shares at 1 p.m., her votes from these shares cannot be used toward the proposal.

The above values can only be changed via governance, itself. However, there are immutable minimum and maximum amounts, such that a malicious proposal to change these variables cannot disable the governance process. For example, if the proposal threshold percentage was ever greater than 100%, no new proposals could ever be made.


Proposal Threshold Percentage




Quorum Percentage




Voting Period

3 days

2 days

14 days

Voting Delay

1 day

12 hours

7 days

Some may be curious why the Proposal Threshold and Quorum percentages exist. The Proposal Threshold percentage is used to prevent spam of proposals by malicious actors. If it did not exist, anyone would be able to create any number of proposals at will. Similarly, the quorum percentage exists such that an actor cannot execute a proposal with a small number of the total votes. After all, it does not make sense that a proposal should pass if it would only benefit a small number of stakeholders.

These values should be set to best suit the company's needs. For instance, if it is found that a small shareholder is creating distractive proposals frequently, it may be desired to increase the proposal threshold percentage. Similarly, the Mezzanine team expects voting activity to differ greatly between organizations. Organizations with extremely active shareholders should likely increase their quorum percentage, while organizations with inactive shareholders should likely decrease their quorum percentage.

The voting delay and period should also likely be adjusted by the size of the organization and the number of shareholders. Since smaller organizations need to execute quickly, they will probably use shorter voting delays and periods. Conversely, larger organizations need better checks and balances among stakeholders and should use a longer voting delay and period.

Proposal Cancellation

All proposals in Mezzanine are cancellable by the Mezzanine team and a set of individual(s) known as Defenders. The team has designed the cancellation of proposals this way to prevent the exploitation of organizations that receive malicious proposals. Without doing so, there would be no mechanism to stop an actor from temporarily attaining the majority of votes during the voting delay and executing a malicious transaction. This behavior greatly increases security at the cost of centralization and may be deprecated in future versions of the protocol.

If 75% of a company's total votes are voted for a proposal, the proposal will become instantly executable: the voting period no longer needs to pass. This enables smaller organizations, which are more likely to have consensus, to execute proposals rapidly if needed. Some may be curious why this number is not 50%, since if greater than 50% of a company's total votes are for a proposal, it will always eventually pass. This number was chosen due to its difficulty in acquisition. In the worst-case scenario, the malicious actor could instantly swap the board and subsequently authorize and issue shares to themselves. However, since a proposal is not instantly executable after attaining ~50% of the total votes, the Mezzanine team will be able to cancel the malicious proposal before its execution.

Voting Delegation

In this governance system, an account's votes refer to the voting power that an account has across all share classes. For example, assume that company Foo has 2 different share classes: a common shares class with a voting weight of 1 and a preferred shares class with a voting weight of 5. Alice has 1 share of each, meaning that she has 1 + 5 = 6 votes in Foo's shareholder governance. Votes can be delegated to another account. This account can then vote on behalf of the shareholder. If Alice delegates her votes to Bob, who has no shares, he will have 6 votes to use on Foo's governance proposals, while Alice will have none. Delegation can be changed at any time, and self-delegation is activated by default. Delegation takes place across all share classes and all vesting shares instead of repeated delegation is for each share class.

Treatment of Lock-ups & Vesting

Investors' shares that are locked-up can vote in shareholder governance. However, employees cannot vote with shares that have not vested. For example, Cynthia participates in company Foo's priced round, receiving 1,000 Preferred Shares with a voting weight of 2 that will be unlocked over 4 years. She will immediately be attributed 2,000 votes in this governance system. In contrast, David is an employee who is receiving 1,000 common shares over the next 4 years. He will have no voting power in governance.

Shares Held by the Company

A company's treasury, its departments, and its modules will never have voting power in their own governance. However, a company's treasury, departments, and modules can vote in another organization's governance. Additionally, any shares owned by the treasury will not be counted towards the total supply of votes.

Share Class Governance

The final governance system in Mezzanine is Share Class Governance. It shares some functionalities of both Startup Governance and Late Stage Governance and is best suited for mature startups that would like to have major investors participate in governance.

Each of the company's share classes are allocated board seats. These board seats can then be subsequently assigned by that given share class via a proposal and voting process. This provides an simple way to share power with large investors of of each investment rounds.

For instance, company Foo has two share classes: common shares and preferred shares. Common share holders participate in selecting the board seats allocated to that share class. Preferred share holders participate in selecting the board seat(s) allocated to their share class.

Allocated board seats cannot decrease. If a company increases the number of board seats allocated to their Preferred Shares to two, it cannot be subsequently decreased to zero or one. Increasing allocated board seats of a share class requires a supermajority of the board. Common shares have no limit on their allocation of board seats, while Preferred Shares can have up to three allocated board seats.

Similar to startup governance, the execution of actions to authorize shares and change the threshold for the board of directors requires a supermajority of signers. However, the management of board seats requires a proposal process.

Unlike Late Stage Governance, proposals in Share Class Governance are solely used to manage the assignment of board seats for that given share class. Assume Foo has two board members: Dave and Eve. Foo's common shares are assigned one board seat, which Dave occupies, and Foo's preferred shares are assigned two board seats, one of which is Eve. The other seat for Foo's preferred shares remains unassigned. Shareholders of Foo's Preferred Shares can assign a board member, remove Eve as a board member, or swap Eve with a new board member via the proposal and voting process. They will have no influence over Dave nor the board seat that he occupies.


Authorizing shares

Supermajority of signers

Increasing allocated board seats

Supermajority of signers

Adding a board member for an unassigned board seat

Proposal and voting

Removing a board member for an assigned seat

Proposal and voting

Swapping a board member for an assigned seat

Proposal and voting

Changing the quorum percentage

Supermajority of signers

Changing the proposal threshold percentage

Supermajority of signers

Changing the voting delay

Supermajority of signers

Changing the voting period

Supermajority of signers

Switching governance systems

Supermajority of signers

Quorum and proposal threshold percentages are the same across share classes. For example, if the quorum percentage is set to 10% and Foo has 1,000 common shares and 2,000 preferred shares, a proposal for common shares and preferred shares would require 100 and 200 for-votes to pass, respectively.

When switching to this governance system, the board seats allocated and assigned to the common shares will reflect the current state of the board. For example, if Foo has Alice, Bob, and Charlie as board members before switching to this governance system, there will be three allocated board seats who are assigned to Alice, Bob, and Charlie. There will be no allocated board seats to any of Foo's preferred shares.

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