Investors at Banco Santander may have been given a glimpse of the future of proxy voting at the bank’s AGM this year, where they were encouraged to cast their votes using blockchain technology.
Blockchain is most commonly known as the technology that underpins bitcoin, the digital currency that surged in value last year. But proponents of blockchain technology say it can have many more practical uses, including proxy voting, and that it boosts transparency because it cuts out intermediaries.
Banco Santander partnered with Broadridge Financial Solutions to explore the feasibility of using blockchain at its AGM. The two companies started collaborating with JPMorgan and Northern Trust in November 2016, when a cross-company working party was formed. The group consisted of technical staff and business leaders from all four companies who met on a weekly basis for an initial pilot in April 2017. During the more recent AGM meeting in March 2018, the number of participants increased with additional global custodians and institutional investors joining the bi-weekly planning sessions.
The pilot was carried out at Santander’s AGM last year, to give the bank’s institutional investors a sense of how the technology would work. After that trial, the working group created a distributed ledger on which the proxy voting at Santander’s AGM could occur. A distributed ledger is a platform that links all users – in this case proxy voters – and is not governed by a central authority. Each participant receives a copy of the ledger at the end of the process to ensure nothing has been tampered with and that there is accountability between participants.
At this year’s Santander AGM, held on March 23, investors were asked to cast their vote twice: once in the traditional manner and once on the distributed ledger. Investors accessed the distributed ledger through Broadridge’s web application. One in five (21 percent) of the AGM participants made use of the new technology.
The results of the votes cast using blockchain were available within two days of the AGM, compared with the usual two or three-week wait with traditional proxy voting. In the near future, voters will be told real-time what the results are, according to Broadridge Financial Solutions.
Sergio Gámez, global head of shareholders and investor relations at Banco Santander, tells IR Magazine that the feedback from investors has been very positive.
‘We have been congratulated by investors for bridging the gap of communication between the corporate issuer and the investor using this pioneer technology,’ he says. ‘The investor was able to receive golden source information rather than an abridged translation in order to take an informed decision and avoid all the registration custodial procedures of cross-border voting due to using this direct method.’
Almost two thirds (60.7 percent) of Santander’s investors are institutional and the use of blockchain was an attempt to get greater participation from them. ‘It is very important to ensure institutional participation, and using blockchain technology has enhanced efficiency, vote transparency and integrity across the vote life cycle,’ Gámez says.
Patricia Rosch, president of international investor communications solutions at Broadridge Financial Solutions, says the enhanced transparency around when a vote is cast could be a significant innovation in proxy voting.
‘What we’re finding by using the distributed ledger technology is that it supports enhanced transparency across the entire voting life cycle,’ she explains. ‘It supports institutional investors that want to be able to ensure their vote has been counted as they have cast. The distributed ledger technology application included end-to-end vote confirmation.’
She adds that Broadridge Financial Solutions has been approached by other issuers interested in using blockchain for their proxy voting efforts, and that the company may also explore uses for blockchain in other corporate actions.