digital transformation of corporate governance 1 -broadridge.pdf · 2018-09-07 · digital...
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Digital Transformation of Corporate GovernanceShareholder Voting and Communication Trends
Increasing Use of Technology
Chris NixonDirector, New Product and Business DevelopmentBroadridge Financial Solutions Internationalp +1-631-254-1899 | Twitter: @NixonProxy
2© 2017 |
Questions or comments?
During the presentation please feel free to send questions/comments to:
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Global Themes
The world of investor communications is changing faster than ever
CG, ESG and transparency are drivers
Investors recognize the benefits
Shareholder Voting and Communication Trends
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Market Trends
New entrants and increased competition
Proxy processing becoming as important as other corporate actions
Regulation providing opportunities and challenges
Innovative new technology
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Regulatory and Infrastructure Trends
European regulations dominated by SRD 2
APAC adopting best practice regulations from the UK / EMEA
Core capital market infrastructure
investment
Exchange and index dialogue on
governance criteria
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Corporate Governance Trends
Growing demand for proxy services in various markets (EU,
Taiwan, Japan, Australia)
Mid sized asset managers turning away from a passive stewardship
approach
Service providers across the value chain reviewing their
stewardship and governance product portfolios
Increasing Use of Technology
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Framing the Future
Established Ecosystem
Participant
Differentiation
Technological Development
Widespread Adoption
10© 2017 | CLIENT CONFIDENTIAL INFORMATION
Artificial Intelligence (AI) and Robotic Process Automation (RPA)
Blockchain/Distributed Ledger Technology (DLT)
Cloud Computing
21 3
Data & Analytics
4
Technological Development
Technological
Innovation
AI/RPA
DLT
Cloud
Data
Virtual Shareholder Meetings
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Overview
• Distinctions and Requirements
– Similar to earnings calls
– Authentication required
– Participation required
– Voting required
• Best practices for VSMs
– Ensure equal access for all participants
– Establish reasonable time guidelines for shareholder questions
– Establish rules for when questions are out of order
– Establish rules to promote transparency
– Post questions received online during the meeting
– Ensure shareholders have access to board members
– Have a technical support line available
– Archive virtual shareholder meetings for future viewing
• Process
Notification
Dialogue
Authentication
Access
Interaction
Voting
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US State of Incorporation Requirements
8 states prohibit any
type of virtual meeting
• Includes New York
42 states allow virtual meetings
• Includes Delaware
• 30 states allow virtual only, 12 additional states allow a hybrid meeting
• ~75% of companies are covered by the states that allow virtual/hybrid meetings
+
-
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over
95%
2017 virtual meetings
approximately
90%
2017 virtual meetings
wereVirtual Only
VSM Usage Trends
Meeting Format
Audio is streamed live over the internet– Generally conducted via phone line– Very similar to an earnings webcast
Video
Audio
Live video streaming– Requires production capabilities including cameras
(Broadridge can supply)
Meeting Types
Stand alone virtual meeting
– All shareholders are directed to a website to attend the meeting
Hybrid
Virtual Only
A combined physical and virtual meeting
– Shareholders can attend in person or online
wereAudio
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VSM Adoption: Overall and Virtual-Only vs. Hybrid
18 1826
3550
86
149
205190
1
1 31
1
3
4
6
7
5
25 10
19 2435 39
2820 161
4
87
75 5
44
4
2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 *2018 *2018Virtual Audio Virtual Video
*2018 Data – January 1 – June 30, 2018
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How It Works – Meeting Set-Up
Virtualshareholdermeeting.com
Today a company publishes their meeting date and time in their proxy statement which is delivered or made available to all shareholders
• The company can substitute a website for a physical address as the meeting location
– A unique control number is provided to each shareholder to use to log into the virtual meeting
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How It Works – Shareholder Login Page
• Broadridge offers an easy single step login process
• Shareholders log in to the virtual meeting using their control number
• Guests can also access the meeting if the company chooses
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How It Works – Shareholder Meeting Page
• Side by side presentation and video
• Easily submit a question
• Easy access to related materials
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How It Works – Meeting Page with Voting
• Shareholders can experience the convenience and ease of real-time voting during a virtual meeting through the VSM platform.
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How It Works – Optimized for all Devices
No matter where your shareholders are, or what device they use, they can easily access your meeting
• View video and list to audio commentary
• Cast votes
• Ask questions
• Access meeting materials
• Whether on a phone, tablet, or personal computer, shareholders, virtual meetings are convenient for shareholders
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How It Works – Administrative Panel
Insight into votes cast in real-time
• Monitor questions as they come in
• Provides attendee profile information
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How It Works – Shareholder Information Display
Post Meeting Reports
• Vote Reports
• Attendee Reports
• List of questions
Distributed Ledger Technology (DLT)
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Current Reconciliation Processes
Current Process vs Blockchain
Cryptographically Immutable Records
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Terminology
Blockchain: a digitized, decentralized, public ledger of related transactions
Distributed Ledger: a type of database spread across multiple sites, regions, or participants; DLT and blockchain are used interchangeably
Bitcoin: a type of cryptocurrency
Public blockchain: a completely open network that anyone can join and participate in
Private/permissioned blockchain: a restricted access network that requires a validated invitation
Cryptographic key: a string of data that is used to lock or unlock cryptographic functions, including authentication, authorization and encryption
Mining: generally the process by which transactions are verified and added to public blockchains
Smart contracts: a computer protocol intended to facilitate, verify, or enforce the negotiation or performance of a contract., they render transactions traceable, transparent, and irreversible.
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Blockchain to the rescue?
Distributed record keeping
Crowd-based (mined) verification
No reconciliation required
No intermediaries
No “double spending”
Full transparency
No business logic
Infrastructure support
Smart contract support
Blockchain required for participation
Processing speeds
Limited demand
Pros Cons
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Blockchain for the Financial Services Industry
Transparency Security/ Privacy Risk Mitigation Cost Reductions
Increased Speed Reach / Ubiquity Ease of Use Auditability
Key Benefits for Financial Services Industry
Key Concerns for Financial Services Industry
Regulatory Environment
Interoperability StandardizationData
Management
Broadridge’s Global Proxy DLT Strategy
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Broadridge DLT-Focused Efforts
Invest in Leading Block Chain Start-ups
Internally Invest Across Numerous Prototypes
Co-innovating with Clients in Specific Areas
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Global Proxy DLT Solution Overview
Participation by All
• Meeting Announcement
• Agenda Distribution
• Entitlement Capture
• Vote Collection
• Vote Execution
• Vote Confirmation
• Meeting Results Distribution
Full Functionality
• Issuers
• Transfer agents/registrars
• Global banks and brokers
• Local subcustodians
• Institutional investors
• Registered shareholders
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Shareholder Rights Directive• Process ‘without delay’• Shareholder identification
Allows regulators to view, audit, and confirm records Stewardship Codes and Access to Data
Record date/entitlement calculation reconciliation Voting Period Extended Blocking/re-registration process facilitated via reconciliation Power of Attorney eliminated
Golden agenda – “Single source of truth” End-to-end confirmation
• Clear entitlement calculation and trackingQuorum tracking and Live Meeting ManagementAuditabilityData
• Point in time access through voting period
Eligibility certainty• Clear entitlement calculation and tracking
Direct voting Single System and Technology
Market Conditions
Regulatory Change
Transparency
Operational Efficiencies
Global Proxy on DLT: Benefits
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Global Proxy DLT SolutionAnnual Meeting Dashboard, Live Voting Tracking, and Investor Voting Platform Screens
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Participants View Data at Authorized Level
Broadridge - Private & Confidential
Participant Level of Detail
Issuer Data is presented at the aggregated job level; No custodian, investor or local account level information is shared.
Issuer Agent/Registrar Data is presented at the local account level; No custodian or investor account level information is shared.
Custodian Data is presented at the custodian level. All records provided by the custodian to Broadridge are available for viewing; this also includes investor activity.
Investor Data is presented at the investor level. All records provided by the custodian and investor activity is available for viewing.
Sub Custodian Data is presented at the local account level. Beneficial owner information is only available in the markets that require disclosure.
Broadridge Data is accessible at the aggregate and detailed level for each of the participants. Broadridge does not have detailed view of data loaded to the DLT that is not part of the Broadridge solution.
Data access is controlled through rules-based Ownership Logs and Smart Contracts that exist within
the DLT. Access is restricted to existing levels of access within the legal chain of intermediaries.
Use Case
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Global Proxy Blockchain Journey
Shadow 1 AGM
April 2017
Banco Santander AGM 2017
Test Meeting
Nov 2017
Repsol AGM 2017 Test
Shadow 2 AGM
Mar 2018
Banco Santander AGM 2018
ICJ Proxy Processing POC
Q2 2018
• DLT rules-based
environment and
front-end application
developed
• Demonstrated
process efficiency
through DLT;
improved
timeliness and
access to data
• DLT connectivity with
read/write capability,
Vote Confirmation
and user reporting
functionality added to
DLT
• Transparency
achieved through
DLT; both voting
and access to point
in time data
• Shadow processing
for complete process
with full participation
• Full market
participation of end-
to-end DLT proxy
process
Our blockchain Proof of Concepts (POC) have evolved over time to shadow processing for the complete proxy vote process with participation from issuer agent, custodian, sub-custodian and institutional investor.
• Shadow processing
to replicate/enhance
ICJ proxy process
model
• Demonstrate
benefits of DLT to
Japan proxy
processing
36© 2017 |
Banco Santander AGM POC – March 2018
ObjectivesRun shadow processing of proxy processes for Banco Santander’s live AGM in March in Broadridge’s Global Proxy blockchain environment
Scope
• Distributed Ledger setup
• Smart contract with market specific rule engine
• User Interface for participants to review, edit, confirm details
• Meeting/agenda set up functionality for Issuer Agent
• Shareholder entitlements processing
• Vote processing
• Vote reports and trends
• Vote confirmations
Participants
Issuer Agent
• Santander
Institutional Investor
• Investment Managers
Global Custodians
• JP Morgan
• Northern Trust
• Another two separate Global Custodian Banks
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Banco Santander AGM POC – March 2018
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We continue to drive the innovation roadmap across the industry to help our clients get ahead
of today’s challenges and capitalize on tomorrow’s opportunities
No part of this document may be distributed, reproduced or posted without the express written permission of Broadridge Financial Solutions, Inc.
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