This time of year, calendars are usually filled with annual general meetings (AGMs) as well as other types of board and shareholder gatherings at corporations, critical market infrastructure organisations and custodians. In addition to being costly, these events tend to have a low shareholder turnout because it is time-consuming to participate in person, even for local and national investors. Attending is especially cumbersome for international shareholders, and as cross-border investments have increased, it has become more challenging to engage with them while maintaining a strong corporate governance culture.
Currently, in-person gatherings are especially limited by the novel COVID-19 pandemic. Corporations and central securities depositories (CSDs) across the globe must find and implement creative ways to stage gatherings remotely, or postpone them altogether.
These recent challenges aside, corporations and CSDs are still receiving pressure from the industry and shareholders alike – to improve investor engagement while maintaining strong corporate governance culture amidst efforts to attract local, national and international investors.
Innovation application of DLT opens new opportunities for CSDs
Legacy infrastructure and processes combined with the reliance on physical presence create friction in AGMs and other voting events that ultimately discourages shareholders from participating. Lack of visibility and control over votes, voting history and proxy assignment make the processes even more challenging for corporations. Flexible technology solutions that encourage shareholder participation, facilitate communication between investors and company representatives, and simplify the remote voting process can modernise current practices and lay a future-proof foundation for organisations everywhere.
Web-based voting solutions alleviate some of the existing frustrations, but they do not solve the problems completely. An alternative approach is to use a blockchain-based eVoting solution, designed to provide a high level of security and confidentiality, to improve transparency and accessibility, and at the same time strengthen vote tracking and uphold strong corporate governance. The use of blockchain is implemented through so called ‘eVoting’ solutions for AGMs or other confidential voting events across distributed audiences.
How does eVoting work?
eVoting technology eliminates manual processes. The CSD’s share register data are held on an immutable, anonymous and encrypted blockchain. The system issues voting right assets and voting token assets to each shareholder. Once they are distributed, shareholders may spend voting tokens to cast votes on each meeting agenda item where they own voting right assets. For intermediated holdings, a custodian can distribute the voting right assets and token assets to their clients to enable direct voting by the beneficial owner.
eVoting on a blockchain system is fast, and a fully auditable view of actions is recorded in the immutable ledger. It enables enhanced insights for meeting service providers as well as corporations through real-time access to data on securities holders, holdings and votes. Moreover, they have the ability to view the full voting history on a single account.
Investors will have one, consolidated, online access to all eligible meetings, including all relevant information and the voting process itself, through one single account. This dramatically reduces the complexity surrounding shareholder engagement.
Several successful proof-of-concept projects have helped to evolve transaction settlement recently. Using innovative technologies such as blockchain to achieve remote shareholder voting is a big step toward transforming investor events such as AGMs, as well as increasing access and transparency. Blockchain-enabled eVoting can help corporations and investors to safeguard and strengthen corporate governance as they move along their own digital transformation journey. For corporations that are seeking to increase their international investor base, this type of digital solution enables new business models where physical presence may not always be the preferred format.
Today, corporations in all industries across the globe are coping with social distancing and navigating a new world where business activities must continue while staff learn how to operate remotely. eVoting removes physical barriers, provides continuity for corporations and allows shareholders to exercise their rights – all without having to postpone events. Embracing emerging technologies such as blockchain in a novel approach can transform CSDs and their business practices, streamline manual processes, and most importantly, uphold a corporate governance structure that meets the needs of both corporations and their shareholders.