Banco Santander and Broadridge Financial Solutions completed a practical use of blockchain for investor voting at the Bank’s annual general meeting (AGM) in March. This implementation employs blockchain technology to enhance global proxy vote transparency and increase operational efficiency, security and analytics. All have benefits for investors, issuers, agent banks and custodian banks.
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.”
Luis Antonio Perez, head of Corporate Services at Banco Santander, said: “The blockchain technology has enhanced efficiency and transparency upon the reception and vote tabulation process, which will result in bridging the gap between all in the process.”
AGM voting, Banco Santander and Broadridge, with JP Morgan and Northern Trust
Santander and Broadridge – in collaboration with J.P. Morgan and Northern Trust as custodian banks – conducted the pilot on March 23rd for Santander’s annual general meeting (AGM). Also participating were Banco Santander Corporate Services as the issuer’s agent and Santander’s blockchain lab.
The pilot was run in parallel to the AGM, with blockchain utilized to produce a ‘shadow’ digital register of the proxy voting taking place using the traditional voting model. The co-collaboration model was extended to additional global custodians participating during the Santander AGM.
Santander, which is the largest bank in the euro zone by market capitalization, has over four million shareholders and 60.7% of the capital belongs to institutional investors. The institutional investors had the opportunity during the AGM to see:
- the counting of their votes
- confirmation arrived almost immediately through application of blockchain technology.
This contrasts with having to wait two weeks for a manual process- involving multiple intermediaries – to complete. The participation amounted to 21% of the total votes present at the AGM. Such an ability, to confirm votes to final investors, anticipates the updated European Directive on Shareholder Rights which comes into force in June 2019. This requires sharing information among intermediaries on the same business day.
Justin Chapman, global head of market advocacy and innovation research at Northern Trust, said: ”Corporate Governance is a key focus for our asset servicing business and we are pleased to include one of our clients, Legal & General Investment Management Limited, as a pilot investor in this important initiative as we extend our collaboration with Broadridge. We are excited about the next phase in creating end-to-end vote transparency using blockchain as an enabler.”
Backed by a proof of concept
Santander and Broadridge conducted a proof of concept a year earlier. This occurred in a closed blockchain environment in collaboration with J.P. Morgan and Northern Trust.
Since then, Broadridge continued to work on establishing a distributed network among all participants, built on a Quorum blockchain platform. A key benefit includes enhanced transparency across the vote lifecycle. Added functionality incorporated an expansion of the platform to include the participation of institutional investors (to provide improved transparency and end-to-end vote confirmation).
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.
“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.”
Broadridge Financial Solutions is a US$4B fintech firm which provides investor communications for, and technology-driven solutions to:
- mutual funds
- corporate issuers.
Broadridge’s investor communications, securities processing and managed services solutions help clients reduce their capital investments in operations infrastructure. This enables its clients to focus on core business activities. Today, Broadridge’s infrastructure:
- underpins proxy voting services for over 50% of public companies and mutual funds globally
- processes more than $5 trillion in fixed income and equity trades per day.
Enterprise Times: what does this mean
Three ‘things’ stand out from this. The first is patience. Banco Santander and Broadridge piloted AGM voting a year ago. They then used the results to improve and prepare for 2018. Blockchain initiatives take time to deliver.
The second involves the number of organisations participating. This was not just Banco Santander or Broadridge. Custodians like JP Morgan and Northern Trust were key collaborators. Blockchain is about collaboration, whether internally or (more probably) externally.
The third connects solving one problem (AGM voting) with opening an opportunity. A possible side benefit is such AGM voting might encourage shareholders to vote. This would improve corporate democracy. According to Banco Santander, the most recent AGM saw a record of 64.55% of the shareholders participate (which represents a business opportunity for the Corporate Services of Santander Global Corporate Banking for its clients).