Santander shows potential of blockchain in company votes

Santander has scored a digital coup: the Spanish bank has become the first company in the world to use blockchain to make it easier for investors to vote at an annual meeting.

The eurozone’s largest bank by market capitalisation said it and Broadridge Financial Solutions, a technology company, ran a test at Santander’s annual meeting in March.

Voting took place by traditional methods but they used blockchain, a giant online public ledger, to produce a shadow register.

The bank said its pioneering move could help revolutionise corporate democracy.

Investors at present often have to vote two weeks before a meeting to allow time for ballots to be counted.

The process has been criticised, and some people claim that votes are frequently lost or that it is difficult for investors to vote outside their home market.

Santander said the use of blockchain would speed up the process at annual meetings and make it easier for more shareholders to take part.

Sergio Gámez, global head of shareholders and investor relations at Santander, said the annual meeting was “one of the most important corporate governance events” for a listed company.

“In the case of Santander, having very fragmented capital, it is important to ensure the participation by investors and shareholders. This year using blockchain technology for the institutional vote has been a great help in terms of transparency and agility,” he said.

The bank has more than 4m shareholders with 60.7 per cent of stock belonging to institutional investors.

The proxy voting pilot, which was run in collaboration with JPMorgan and Northern Trust as custodian banks, included 21 per cent of those who participated in the annual meeting.

Blockchain, or distributed ledger technology, gained prominence as the technology underlying cryptocurrencies such as bitcoin, but it has attracted increasing attention from traditional banks, asset managers and other financial services companies.

Santander has been one of the most active international banks in the area. Last month it launched a blockchain-based cross-border payments system and it has taken stakes in blockchain specialists such as Ripple and Blythe Masters’ Digital Asset Holdings.

Last month its Spanish rival BBVA became the first global bank to issue a loan using the technology, while UK group HSBC this week completed the world’s first commercially viable trade-finance transaction using blockchain.

Despite the rush of interest and several successful tests, however, some groups are sceptical about the potential to use blockchain at scale.

This year, academics at Tilburg and Ghent universities said blockchain could offer “smart solutions for classical inefficiencies in the corporate governance field”, arguing that it could reduce costs for both shareholders and companies by modernising annual meetings.

“Blockchain can . . . decrease the organisation costs for companies and increase the speed of decision-making, making the AGM a fast and lean corporate organ,” they wrote.

Justin Chapman, global head of market advocacy and innovation research at Northern Trust, said one of its asset management clients took part in the Santander pilot. “We are excited about the next phase in creating end-to-end vote transparency using blockchain as an enabler,” he said.