Enhancing shareholders’ voting process through blockchain

THE theme of the Securities Investors Association (Singapore)‘s Corporate Governance Week 2022 was “Advancing corporate governance in an age of disruptions”. The discussions, which wrapped up on Oct 14, centred on how stakeholders can address climate change and other environmental, social and governance risks.

One way in which corporate governance can be enhanced from a shareholder’s perspective is through the use of technology. In a 1932 paper, professors Adolf Berle and Gardiner Means concluded that shareholders have very little power over the affairs of the company. They argued that even if shareholders could vote, they were not able to use their vote as an instrument of democratic control.

Decades later, in a 2019 study conducted in the United States, researchers Alon Brav, Matthew Cain and Jonathon Zytnick found that, when it comes to corporate polling, only 32 per cent of US retail shareholders voted, which was significantly lower than the 80 per cent participation rate by the entire shareholder base. In total, only 12 per cent of the average company’s retail shareholders chose to vote. Their study concluded that retail shareholders played a valuable role through the voting process in disciplining poorly-performing companies, as compared to institutional investors.