American financial services company Broadridge Financial Solutions won a patent for a technology solution that will ease proxy voting. The patent application was filed in November 2017, and the US Patent and Trademark Office (USPTO) has recently granted it.
Corporate governance includes voting by the stakeholders, however, not all stakeholders can physically attend the shareholders meeting. By using proxy voting, the stakeholders can still cast votes, however, it’s a very lengthy process. It’s also often an opaque process, and voters often don’t know if their votes are accurately counted.
Blockchain can help accelerate proxy voting, and assure voters that their votes were accurately counted. Blockchain is a technology where a network of computers maintain a shared, verifiable, and permanent record of data. In this distributed database each node is considered as a ledger, and the entire database is maintained by all nodes.
Changing or deleting an existing block is not possible, hence, to update a blockchain, a new block has to be created. To create a new block, each “Miner”, i.e. the combination of powerful software, specially designed hardware, and their user, has to provide proof of work (POW) for the last recorded block in the blockchain, using a massive number-crunching operation done at high-speed in a competitive environment. Such rigor makes hacking blockchain economically non-viable.
Broadridge‘s solution works as following:
- A blockchain network will consist of externally owned presence (EOP) member nodes;
- A supervisory EOP member node will generate personalized cryptographic private key for each peer EOP member node;
- The distributed database of blockchain will store persistent data objects;
- There will also be self-contained self-executing software containers (SESCs);
- SESCs include a software that will generate a state hash that will represent a current state of a persistent data object;
- The software will perform a data action with the persistent data object;
- The software will also determine whether an EOP member node is permitted to cause the SESC to perform the data action with the persistent data object;
- The predefined explicit policy criteria allowing proxy voting will be checked, and only after meeting the required criteria the proxy voting will be done.
The system will offer end-to-end voting confirmation, and participants will have access to relevant analytics. The security is ensured by managing access and permission via cryptographic tools. The patented technology solution can be applied to repurchase, or repo, agreements.
In addition to their work with this patent, Broadridge, headquartered in Lake Success, New York, USA is also working with other clients on pilot projects involving blockchain technology. A few central securities depositories (CSDs) have earlier created blockchain-powered proxy voting solutions, and they are looking for early adopters, among downstream companies such as custodian banks and local asset managers.
