Banking group Santander, alongside fintech company Broadridge, recently completed a successful test using a blockchain system for securing and recording investor voting.
Working alongside Broadridge Financial Solutions, Inc. – in collaboration with J.P. Morgan and Northern Trust as custodian -Santander completed what it is calling a first use of blockchain for investor voting at its annual general meeting (AGM) back in March. The blockchain record was kept as a ‘shadow’ register of voters during the event, running alongside the long-standing traditional procedures for such affairs.
However, the company described the successful test system of its system as a method that “enhances global proxy vote transparency and increases operational efficiency, security and analytics, which is beneficial for investors, issuers, agent banks and custodian banks.”
As the largest bank in the euro zone by market capitalisation, Santander has over four million shareholders – with 60.7% of the capital belonging to institutional investors. During March’s AGM these institutional investors were given the opportunity to see how the blockchain system allows their votes to be counted almost instantly, in comparison to the two weeks in usually takes to process proxy votes, using various intermediaries. Around 21% of total voters used the new platform, with the bank hoping that a full implementation could help increase motivation to vote and boost corporate democracy.
It also hopes that the system it develops could become a business opportunity for Banco Santander Corporate Services, which acted as issuer’s agent in this instance – and does so for the AGMs of more than 50 other large clients. Its new methodology will also assist with compliance to the upcoming European Directive on Shareholder Rights, which comes into force in June 2019, and requires sharing of vote information among intermediaries on the same business day.
The system was first tested by Santander and Broadridge around a year ago in a closed blockchain environment. Since then, Broadridge has continued to refine the system, built on the Quorum blockchain platform. – J.P. Morgan’s enterprise-focused version of Ethereum.
Patricia Rosch, president of Investor Communication Solutions, International at Broadridge, said: “The successful completion of a second pilot along with the next phase of our blockchain-based proxy voting solution demonstrates Broadridge’s continued commitment to developing innovative technology solutions in the re-imagination and improvement of global proxy to help our clients get ahead of today’s challenges.” She added: “As a key innovator in capital markets and a leader in proxy, we continue to implement the newest technologies such as blockchain to improve corporate governance and address the latest regulatory requirements such as the Shareholder Rights Directive.”
Sergio Gámez, global head of Shareholders and Investor Relations at Banco Santander, said: “The Annual General Meeting is one of the most important corporate governance events for any listed company. In the case of Santander, having very fragmented capital, it is very important to ensure the participation by investors and shareholders, and this year using blockchain technology for the institutional vote has been a great help in terms of transparency and agility across the vote lifecycle.”
This is the latest in series of blockchain innovations realised by Santander, chief among them being its recent introduction of the Ripple (XRP)-based ‘All Pay’ payments app.