Studies have estimated that BlackRock, Vanguard, and State Street together hold 40% of the voting power in the Russell 3000, 25% of the voting power in the S&P 500, and 20% of the voting power in the MSCI ACWI Index. Studies extrapolating the growth of these asset managers estimate as much as 50% of all corporate voting power being controlled by the “Big Three” within the next 20 years.
Solution:
A blockchain application allowing individual fund investors to electronically vote on corporate actions in the underlying companies with automated consolidation and validation of the votes.
- Increased transparency and accountability, as all votes would be recorded on the blockchain and available for anyone to view.
- Greater accessibility to shareholders, as they would be able to vote remotely and electronically without the need to attend physical meetings.
- Smart contracts can be used to consolidate and validate votes from thousands/millions of underlying fund investors into a combined final voting tally.
- Underlying fund investors can more actively express their opinions and beliefs to steer the direction of the companies.
- Information about corporate actions can be more readily available and investors can consolidate their efforts to affect change.
The challenges in implementing such a system would be the significant overhaul of existing systems and regulations, technical issues in terms of ensuring the security and reliability of the voting process, and concerns about adoption and implementation as some investors and stakeholders may be hesitant to embrace new technology.
The concentration of corporate governance and voting power among a small number of large asset management firms is a growing concern, and there is a need to find alternative solutions to the current system of corporate governance. Blockchains are uniquely positioned to solve this problem for companies and their investors by giving control back to the millions of underlying stakeholders.