Corporations on Blockchain:

Opportunities & Challenges

Alexandra Andhov†
Blockchain technology has the potential to change the way corpora-
tions are managed and how they function. A system that offers greater
decentralization and ability for shareholders to more actively and accu-
rately engage in decision-making processes will be fundamental for mod-
ern corporate governance. We observe that shareholders in recent years
have become more active and interested in the corporate matters of the
companies that they invest in. Decades after Adolf Berle and Gardiner
Means’ elemental publication, the division between investment and control
persists primarily because of the existing architecture of the corporate sys-
tem. But the architecture is changing and blockchain technology repre-
sents a new component. Thanks to the technological development,
shareholders could strengthen their voice and take part in long-term corpo-
rate decisions. Could technology be the answer to the long-lasting division
between corporations and their investors as well as the division between
investment shareholders and retail shareholders? If we organized a corpo-
ration, its information, and its decision-making mechanisms based on a
new technology that promotes collaboration and can easily encompass
incentive mechanisms, we might have a tool to provide more efficiency and
transparency, and even potentially address the values (or a lack thereof)
that govern our corporate system today. This Article provides an analysis
on the opportunities and potential challenges of using blockchain technol-
ogy for the purposes of corporate governance in publicly traded corpora-
tions. Beside the inquiry into the technology behind blockchain, the Article
reflects on what value, if any, blockchain technology would have for share-
holders and suggests how the technology could be used in publicly traded
companies.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
I. Understanding Blockchain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A. Structure of Blockchain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Blockchain v. Bitcoin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
C. From Bitcoin to Ethereum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
D. Incentives on Blockchain: Cryptoeconomics . . . . . . . . . . . . 11
E. Limitations of Blockchain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

† Alexandra Andhov, Assistant Professor of Corporate Law, Faculty of Law,

University of Copenhagen, email: [Link]@[Link]. Part of this Article was
written while I was a Fulbright Scholar at Cornell Law School in 2019. An earlier
version of this Article was published on Social Science Research Network (SSRN).
53 CORNELL INT’L L.J. 1 (2020)
2 Cornell International Law Journal Vol. 53

1. Speed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2. Power & Scalability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Hacking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
II. Technology for Technology, or is There Purpose and
Value? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
A. Transparent Records of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. General Meeting: Information & Participation . . . . . . . . . 20
C. Shareholder’s Vote: Proxy & Correct Calculations . . . . . . 23
D. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
E. Transparency, Long-Term Incentive Plan, and Security . . 27
III. Blockchain for Publicly Traded Corporations: A Proposal . 29
A. What Form of a Blockchain? . . . . . . . . . . . . . . . . . . . . . . . . . . 29
B. Governmental Agency: A Developer and an Observer at
the Same Time? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
C. A New Role for Stock Exchanges? . . . . . . . . . . . . . . . . . . . . . . 33
D. Corporations as the Trust-Holders: Risks & Incentives . . 35
E. Shareholders: Miners or Readers? . . . . . . . . . . . . . . . . . . . . . . 36
F. Additional Flaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Introduction

Blockchain is for the upcoming decade what Internet was for the
1990’s. It is a technology that represents, in the simplest terms, a new
infrastructure for communication, data storage, and management. It is a
database which can operate without a central administrator. Many auto-
matically associate blockchain with Bitcoin or other cryptocurrencies, yet
the essential idea behind blockchain is much more intriguing. Blockchain
is a database, a foundation, on which a platform, software, or application
can operate. Blockchain is bringing a new opportunity to create new sys-
tems that will be able to function without a central administrator. This
ultimately changes the dynamic in the cyber world and provides an open-
ing for a new generation of decentralized solutions.
Blockchains are widely accessible and can facilitate economic and
legal transactions. They are being tested to manage the operations of
existing legal entities, serving as frameworks that can potentially develop
into networks. Such networks might prove beneficial for diverse organiza-
tions across the world, be it an international corporation, lengthy supply
chain, or a government. Blockchains aim to help diverse stakeholders
come to an agreement even if they do not know each other and provide
them with an infrastructure for flow of information, data, money, or any-
thing that can be digitized. They can provide a space for decentralized
communication platforms, file-sharing applications, social networks, and
voting mechanisms in publicly traded companies.
This Article reflects on the possibility of corporations using
blockchain technology, focusing on empowering the position of sharehold-
2020 Corporations on Blockchain 3

ers in publicly traded companies. The technology, its advantages, risks,

and limitations are critically reviewed in order to understand how the tech-
nology works, but also whether the technology provides any additional
value for shareholders and companies. Besides the efficiency rationale,
one could argue that using blockchain could streamline voting and
increase shareholder participation. Blockchain could eliminate plausible
fraud by making votes immutable, verifiable, and traceable. The decentral-
ized ledger of shareholders would also reduce the need to enlist proxy
solicitation firms to track shareholders because the information would be
easily accessible. Empty voting could also be minimized. Therefore, there
are a number of theoretical benefits that blockchain could bring. However,
not even a perfect, golden ledger of shareholders is likely to be a panacea
for all the challenges encapsulated in modern corporations, the division
between shareholders and Boards, and the conflict between long-term and
short-term interests.
There are also additional risks that a novel and untested technology
brings. Information might be sent to outdated addresses, the data might
simply be wrong, and extremely sensitive documents can suddenly become
exposed. Implementing the technology could also eliminate diverse
intermediaries who are gatekeeping the system, and thus harm the func-
tioning of the company or even the market. Moreover, shareholders could
remain rationally apathetic, and large institutional investors could con-
tinue to cast votes according to a prearranged formula even more easily
than before, thereby manipulating the voting process. Therefore, as with
any other innovation, one should be excited, yet cautious and critical when
reviewing its benefits. Hence, the ultimate aim of this Article is to under-
stand the value of blockchain technology for modern, publicly traded com-
panies, and their governance mechanism.
The structure of this Article is the following. In Part I, I explain how
blockchain operates, define key terms, and describe constructions within a
blockchain. This is because in order to assess the possibilities that
blockchain brings for corporate governance, one must understand the con-
struction of blockchain itself. Therefore, in the first section, I rely heavily
on existing publications and attempt to clarify them for audiences consist-
ing of lawyers and legal scholars. However, this Article does not aim to be
a technological review of blockchain, rather it aims to reflect on how
blockchain could be applied in the case of publicly traded companies with
thousands, or hundreds of thousands, of shareholders who are scattered all
over the world but are nevertheless required to make decisions together.
Viewing technology as a tool that can be used to achieve certain goals, I
reflect on blockchain’s potential to reform voting in a publicly traded com-
pany as well as its possible effect on corporate governance therein. Next,
in Part II of this paper, I deconstruct the elements of corporate governance
that empower shareholders— starting with shareholder record-keeping,
moving up to the purpose of general meetings, and closing with the use of
proxy voting,— and assess the benefits and risks that blockchain technol-
ogy would bring for shareholders. Lastly, in Part III of this Article, I offer
4 Cornell International Law Journal Vol. 53

an outline of a corporate blockchain infrastructure, highlighting the posi-

tion of some key partners, including governmental agencies, stock
exchange platforms, corporations themselves, and shareholders. Given
that I am not a professional blockchain developer, my outline is a simple,
structural suggestion as I believe that the future solution for market organi-
zations will combine, as blockchain does, numerous technologies while
transforming the existing position of gatekeepers and shareholders.
In light of the above, there are, naturally, limitations to this Article as I
do not believe that any technology provides the cure for corporate life or
corporate governance. Technology is a tool that needs to be carefully
designed in light of the objective we wish to achieve with it. Therefore, the
primary goal of this Article is to review and reflect on whether blockchain,
as a novel technology, could support greater shareholder democracy and
long-term interests, and provide greater clarity and insight into waters that
often remain too muddled.

I. Understanding Blockchain

Blockchain started with a public form— which is an open, distributed,

decentralized, and global database (or a ledger)— maintained by a distrib-
uted network of computers.1 It is open because anyone with Internet con-
nection can join blockchain,2 which means that anyone can retrieve
information stored on a blockchain by simply downloading an open-source
software. Anyone can also create a blockchain account (often referred to as
a wallet),3 comprised of a public address and a private key, or password, in
order to engage in transactions with others without a centralized intermedi-
ary. Entering into the blockchain framework is similar to creating an email
account, yet the logic behind the technology remains mysterious and
incomprehensible for many. In a public blockchain, there is no authority
that allows or denies access to the blockchain.4 Being a distributed frame-
work means that blockchain is composed of computers across the world,
which are connected to each other on the network, directly or indirectly,
and are linked together via an overarching software protocol without a cen-
tral administrator.5
Decentralization means that there is no single party that controls all

1. The technological concept of blockchain was introduced by Stuart Haber and

Scott Stornetta’s paper, arguing for digital time-stamping of documents to authenticate
authorship of intellectual property. See Stuart Haber & W. Scott Stornetta, How to Time-
Stamp a Digital Document, 3 J. CRYPTOLOGY 99, 100 (1991).
2. See Roman Beck & Christoph Müller-Bloch, Blockchain as Radical Innovation: A
Framework for Engaging with Distributed Ledgers, 2017 HAW. INT’L CONF. SYS. SCI. 5390,
5391 (2017).
3. Lucas Mearian, What’s a Crypto Wallet (and How Does It Manage Digital Cur-
rency)?, COMPUTERWORLD (Apr. 17, 2019, 3:00 AM), [Link]
article/3389678/[Link] [https:/
/[Link]/75CX-Y7CB].
4. Cf. Beck & Müller-Bloch, supra note 2, at 5391.
5. Id. at 5390.
2020 Corporations on Blockchain 5

these computers or the operations taking place between them.6 These

computers store copies of a blockchain and coordinate their activities and
the content on the blockchain by using a software protocol that precisely
dictates how network participants store information, engage in transac-
tions, and execute software code.7 In other words, there are rules that are
governing the blockchain but no one can bypass them because all the other
participants on the blockchain are the enforcers of these rules.
Database refers to a location for storing data that can be accessed at
any point in time.8 Besides being of a transactional nature, blockchain
stores data in a unique manner, which allows new transactions to be
stored, but limits the possibility of modifying past transactions.9 However,
the major problem with blockchain being used as a database is that it has a
very limited and expensive storage capacity.10 Large quantities of data
cannot be stored easily, and therefore, blockchain is currently mostly used
as a ledger. Blockchain is a database, which aside from the block structure,
combines in its operations four technologies: (i) peer-to-peer networks (dis-
tributed technology); (ii) cryptography; (iii) consensus mechanism; and
(iv) timestamps. In the following section, I will describe the architecture of
blockchain and explain the activities that take place on it.
Blockchain looks extremely complicated and technical, but like the
Internet, it is sociotechnical in nature. Humans are essential for its archi-
tecture, operations, and oversight. Thus, people are critical to blockchain
technology in a variety of contractor and curator roles.

A. Structure of Blockchain

Blockchain is a database shared across a network of computers span-

ning the world without a centralized party.11 Hence, the first thing to real-
ize is that it encompasses an unlimited number of computers across the
world, where each computer is connected to all the other computers. Each
computer on the network is known as a node.12

6. Id. at 5391.
7. What are Nodes?, BINANCE ACAD., [Link]
what-are-nodes [[Link] (last visited July 19, 2020).
8. Sometimes we refer to blockchain as a ledger. “Ledger” is an accounting term,
which originally meant a book of financial accounts of a particular type. Now, it repre-
sents data storage. See Beck & Müller-Bloch, supra note 2, at 5391.
9. Id.
10. Storage Needs for Blockchain Technology, IBM 1, 7– 9 (2018), [Link]
com/downloads/cas/LA8XBQGR [[Link]
11. See Beck & Müller-Bloch, supra note 2, at 5391.
12. Id.
6 Cornell International Law Journal Vol. 53

Figure 1: Blockchain network: nodes & connections

Each computer has the same copy of the database and there are com-
puters that check that the database remains identical.13 Everyone can have
his or her copy of the database and trust that all those copies remain the
same, even without a central administrator. The database consists of three
key components: (i) the record, (ii) the block, and (iii) the chain.14 The
record can be information, data, contract, money, or almost anything
else.15 The block is a bundle of records that is later linked to other blocks
thereby creating a chain, as shown in the following figure.16

Figure 2: Elements of the chain

Record
R

A block A chain

Once a record with a transaction is created, it is checked by the nodes.

These nodes check the details of the transaction to make sure it is valid.17
Nodes in a blockchain are in constant communication with each other in
order to remain synchronized.18 Depending on the type of blockchain, and
the content of the transaction, the nodes will carry out different opera-
tions. Once the record is checked, the network accepts it and adds it to a
block.19 Each block contains its own unique fingerprint, or hash, as well
as the hash of the previous block in the chain,20 and a timestamp.21 Once

13. See Fritz Henglein, Smart Digital Contracts: Introduction, UNIV. COPENHAGEN 1, 7
(2019), [Link]
[Link] [[Link]
14. Maryanne Murray, Blockchain Explained, REUTERS GRAPHICS (June 15, 2008),
[Link]
[[Link]
15. Id.
16. Id.
17. Id.
18. See Volkan Dedeoglu et al., Blockchain Technologies for IoT, in ADVANCED APPLICA-
TIONS OF BLOCKCHAIN TECHNOLOGY 62– 64 (Shiho Kim & Ganesh Chandra Deka eds.,
Springer 2020).
19. See Murray, supra note 14.
20. Id.
2020 Corporations on Blockchain 7

a block is created and checked by the network, it is added to the chain.22

The timestamp cannot be tampered with after being added thereby solving
problems of data tracking and information security.23

Figure 3: Creating a chain

H H H H
A A A A
S S S S
H H H H

A hash is generated by using standard, cryptographic hashing func-

tions invented by the U.S. National Institute of Standards and Technology
(NIST) and the U.S. National Security Agency (NSA).24 The hash takes the
digital information from the block and generates a unique string of letters
and numbers from that information, which is then uniquely associated
with that block’s transaction.25 The challenge for a hashing algorithm is to
make the hash almost impossible to decipher. One way in which it accom-
plishes this is by taking an input string of any length and releasing an
output string of a fixed length, as seen in the following example.

Input Hash
Alexandra Andhov 8kjfps78
Corporate governance 5sssaw9s
Shareholder democracy her695as

The output string is always of the same length, which makes it difficult
to decode the type of information represented by the hash.26
Generating a hash for any given block is difficult. The hash is created
by using a mathematical guessing game called a proof of work.27 Nodes
must engage in work by solving a computational puzzle.28 The computa-
tional puzzle is merely a game of trial and error, which is also called min-
ing, and it uses a lot of computing power (as well as electricity).29 The

21. See Priyanka Rathee, Introduction to Blockchain and IoT, in ADVANCED APPLICA-
TIONS OF BLOCKCHAIN TECHNOLOGY 3– 6 (Shiho Kim & Ganesh Chandra Deka eds.,
Springer 2020).
22. See Murray, supra note 14.
23. See Haber & Stornetta, supra note 1.
24. Jeremy L. Rasmussen, Password Authentication, in 3 HANDBOOK OF INFORMATION
SECURITY: THREATS, VULNERABILITIES, PREVENTION, DETECTION, AND MANAGEMENT 424, 427
(Hossein Bidgoli ed., 2006).
25. See Murray, supra note 14.
26. ARVIND NARAYANAN ET AL., BITCOIN AND CRYPTOCURRENCY TECHNOLOGIES: A COM-
PREHENSIVE INTRODUCTION 23 (Princeton Univ. Press 2016).
27. For more about proof of work, see id. at 60– 70; Aljosha Judmayer et al., Blocks
and Chains: Introduction to Bitcoin, Cryptocurrencies, and Their Consensus Mechanism, in
SYNTHESIS LECTURES ON INFORMATION SECURITY, PRIVACY, & TRUST 30– 37 (Elisa Bertino &
Ravi Sandhu eds., Morgan & Claypool Publishers 2017).
28. See generally Judmayer et al., supra note 27.
29. Id. at 37. In 2015, it was estimated that one Bitcoin transaction required the
amount of electricity needed to power up 1.57 American households per day. Christo-
8 Cornell International Law Journal Vol. 53

computers that are involved in mining are by themselves trying to solve the
mathematical guessing game. The first computer to succeed creates the
hash and can be rewarded for its work.30 The more nodes on the network
that are attempting to solve the puzzle, the harder it becomes to generate a
valid hash.31 In return for the mining, members can receive some form of
reward.32 In the case of a Bitcoin blockchain, the reward is Bitcoin tokens.
An alternative of mining, offered by some cryptocurrencies through which
a hash can be generated, is proof of stake.33 Proof of stake allows a person
to mine or validate block transactions according to how many coins he or
she holds.34 This concept allows those with more coins to have more min-
ing power.35
Once a node finds a valid hash for a block, the node broadcasts the
solution to the rest of the network. Upon receiving the broadcast, other
nodes in the network run a simple calculation to make sure that the result-
ing hash meets the protocol requirement. This process is known as con-
sensus.36 The protocol states that if the calculations show that the hash is
valid, then the block can be added to the blockchain. Subsequently, a new
blockchain is generated across the network and stored on the nodes. This
process, introduced by Satoshi Nakamoto,37 aimed to preserve the security
and integrity of the information on the blockchain.
The consensus mechanism makes it difficult and costly for any party
to unilaterally remove or modify the data stored on a blockchain. It also
helps a blockchain-based network periodically reach agreement as to the
current state of the shared database, even if members do not know each
other or trust one another. Primavera De Filippi and Aaron Wright com-
pare the Bitcoin blockchain to a tamper-resistant “‘book’ with identical cop-
ies stored on” millions of computers across the world.38 Anyone can add
new content to the book, and once new content has been added, all existing
copies of the book are updated on computers running the Bitcoin protocol
across the world.39 Unlike a book, however, blockchains are not organized
by pages, but by blocks.40 These blocks are linked together by an underly-
ing protocol based on “a sequential, timestamped chain,” and “each block

pher Malmo, Bitcoin is Unstable, VICE (June 29, 2015, 12:23 PM), [Link]
en_us/article/ae3p7e/bitcoin-is-unsustainable [[Link]
30. See Judmayer et al., supra note 27, at 20.
31. Cf. Joseph Bonneau et al., SoK: Research Perspectives and Challenges for Bitcoin
and Cryptocurrencies, IEEE SECURITY & PRIVACY, May 2015, at 104, 106– 07.
32. See Judmayer et al., supra note 27, at 20.
33. Id. at 88.
34. Id.
35. Id. The first cryptocurrency that adopted proof-of-stake mining was Peercoin.
Pioneer of Proofstake, PEERCOIN, [Link] [[Link]
F3BT] (last visited Feb. 25, 2020).
36. See Judmayer et al., supra note 27, at 19– 20.
37. Cf. id. at 19.
38. PRIMAVERA DE FILIPPI & AARON WRIGHT, BLOCKCHAIN AND THE LAW: THE RULE OF
CODE 22 (Harvard Univ. Press 2018).
39. Id.
40. Id.
2020 Corporations on Blockchain 9

also contains a header used to organize the shared database” and keep
order among the blocks on the chain.41 The main component of the
block’s header being the unique hash, which binds together “all transac-
tions contained in that block, along with a timestamp and . . . the hash of
the previous block.”42

B. Blockchain v. Bitcoin
Blockchain was first used in Bitcoin.43 Bitcoin was introduced in late
2008, when one or more anonymous developers named Satoshi Nakamoto
published a nine-page paper titled A Peer to Peer Electronic Cash System.44
Bitcoin represented a decentralized digital currency which operated with-
out any intermediaries or centralized financial institutions. Since its
launch in 2009, Bitcoin has become one of the largest decentralized pay-
ment systems.45
It may appear that Bitcoin and blockchain are used interchangeably.
For example, when explaining blockchain, there are often many references
to Bitcoin because Bitcoin was released as the first application using
blockchain. Hence, blockchain is the technology that underlies the Bitcoin
cryptocurrency. Nevertheless, blockchain technology continues to develop
and expand its possible applications beyond cryptocurrencies. Blockchain
has become a network of numerous peer-to-peer transactions and opera-
tions, including voting, real estate registry, and even stock exchange
infrastructure.46

C. From Bitcoin to Ethereum

Blockchain, as a database, is equipped to store or reference diverse
forms of information, and support a framework where other decentralized
applications can operate, including small programs called smart con-
tracts.47 The first blockchain to enable the creation of smart contracts was

41. Id.
42. Id.
43. See Judmayer et al., supra note 27, at 19.
44. See generally SATOSHI NAKAMOTO, BITCOIN: A PEER-TO-PEER ELECTRONIC CASH SYS-
TEM (2008).
45. E.g., Judmayer et al., supra note 27, at 18.
46. See generally about the application of Blockchain, MOHSEN ATTARAN & ANGAPPA
GUNASEKARAN, APPLICATIONS OF BLOCKCHAIN TECHNOLOGY IN BUSINESS: CHALLENGES AND
OPPORTUNITIES (Springer 2019); BUSINESS TRANSFORMATION THROUGH BLOCKCHAIN (Horst
Treiblmaier & Roman Beck eds., Springer 2019); Marc Pilkington, Blockchain Technol-
ogy: Principles and Applications, in RESEARCH HANDBOOK ON DIGITAL TRANSFORMATIONS
225 (F. Xavier Olleros & Majlinda Zhegu eds., Edward Elgar Publ’g 2016); Alexandra
Andhov, Relevance of Blockchain for Corporate Lawyers, 2020 ERHVERVSJURIDISK TIDSSK-
RIFT (Den.) 29 (2020). See also Banking is Only the Beginning: 58 Big Industries Blockchain
Could Transform, CBINSIGHTS (Apr. 2, 2020), [Link]
industries-disrupted-blockchain/ [[Link]
47. See Alyssa Hertig, What is Ethereum?, COINDESK (Mar. 31, 2017, 2:49 PM),
[Link]
dapp [[Link]
10 Cornell International Law Journal Vol. 53

Ethereum, which added extra functionality to the blockchain system.48

“Ethereum is designed to be a general-purpose, programmable blockchain,”
which itself is able to “execute code of arbitrary and unbounded complex-
ity.”49 Ethereum lets “developers [ ] build powerful decentralized applica-
tions with built-in economic functions.”50
Ethereum is considered the second generation of blockchain, which
stipulates that it is Turing complete51 and does not only track currency
ownership as blockchain, but is also able to track general-purpose data.52
It continues to operate as a peer-to-peer network governed by an open-
source protocol, while being based on consensus rules. Ethereum uses a
similar proof of work mechanism to update the state of the blockchain, and
miners are provided with Ethers— a digital currency similar to Bitcoin.53
Ethereum combines the “general-purpose computing architecture . . . with
a decentralized blockchain, thereby creating a distributed single-state [ ]
world computer.”54
Ethereum introduced a new part in the protocol— the Ethereum Virtual
Machine (EVM)55— which runs all the smart contract programs and makes
Ethereum the single, decentralized computer that it is.56 These smart con-
tracts are capable of processing basic IFTTT logic57 and can verify signa-
tures, record votes, and implement new blockchain-based governance
systems.58 Every operation processed by the EVM is executed by every
active node on the Ethereum network, for which the Ethereum protocol
charges a small fee known as gas.59 Gas refers to the value required to

48. Id. Ethereum was developed by Vitalik Buterin, a young programmer and Bitcoin
enthusiast, who aimed to further the functionality of blockchain. In December 2013,
Vitalik proposed a more generalized approach to blockchain and published a white
paper that outlined the idea behind Ethereum: a Turing complete, general-purpose
blockchain. See generally VITALIK BUTERIN, ETHEREUM WHITE PAPER: A NEXT GENERATION
SMART CONTRACT AND DECENTRALIZED APPLICATION PLATFORM (2013).
49. ANDREAS M. ANTONOPOULOS & GAVIN WOOD, MASTERING ETHEREUM: BUILDING
SMART CONTRACTS AND DAPPS 2 (O’Reilly Media 2018).
50. Id. at 1.
51. The term “Turing complete” refers to English mathematician Alan Turing, who is
considered the father of computer science. Turing complete, in computability theory,
describes abstract machines usually called automata. Referring to Ethereum as Turing
complete means that Ethereum is able to execute a stored program through its Ethereum
Virtual Machine, while reading and writing data to memory. Id. at 8.
52. Id. at 6.
53. Id. at 1.
54. Id. at 8.
55. Id. at 7.
56. See Hertig, supra note 47.
57. IFTTT logic means “If-This-Then-That”.
58. Cf. Ethereum White Paper Made Simple: A Guide to Understanding the Ethereum
White Paper for People Without an Advanced Degree in Computer Geekery, BLOCKCHAIN
REV. 21, 24, 26, [Link]
[Link] [[Link] [hereinafter
Ethereum White Paper Made Simple].
59. DE FILIPPI & WRIGHT, supra note 38, at 29. To better explain gas, one needs to
realize that Ethereum itself entails a number of smart contracts which are to be executed
by a computer. This means that when a smart contract runs, it consumes someone’s
computing power. That computing power is translated on Ethereum to gas, which is
2020 Corporations on Blockchain 11

successfully conduct a transaction or execute a smart contract. In simple

terms, “gas is a unit that measures the amount of computational effort that
it will take to execute certain operations,”60 which an active node will be
paid for in Ethers.61
Even though Ethereum blockchain is updated every ten to twelve
seconds, as opposed to every ten minutes like Bitcoin,62 running a code via
EVM continues to be a slow and expensive process. But despite its short-
comings, Ethereum shows that blockchain can be used in diverse forms
and that a new paradigm of computing, without a central authority, can be
successful. Since the launch of Ethereum, there are currently more than 93
million accounts on Ethereum,63 which is substantially higher than how
many blockchain wallet users there were by the end of 2019— about 47
million.64

D. Incentives on Blockchain: Cryptoeconomics

Blockchain is a decentralized, global database using a peer-to-peer
mechanism, which does not need a central administrator, but that does not
mean that blockchain is free. Rather, it means that blockchain is based on
different incentive models that encourage miners to engage in transactions
and run smart contracts using the computational power of their com-
puters. As a substitute for a centralized or quasi-centralized trust, public
blockchains, be it Bitcoin or Ethereum, are secured by cryptoeconomics— a
combination of economic incentives and cryptographic verification mecha-
nisms such as the proof of work method explained above.65 Blockchains
have incorporated into their protocols block rewards, transaction fees, and
other payoff structures in order to compensate the miners for their compu-
tational power, and thus maintain a blockchain-based network.66 This

later paid to the person who provided the computational power. Every command in a
smart contract has a price measured in terms of gas. Some commands are more expen-
sive, some less, but they are not free. See Ethereum White Paper Made Simple, supra note
58, at 17– 22.
60. Ameer Rosic, What is Ethereum Gas? [The Most Comprehensive Step-By-Step Guide
Ever!], BLOCKGEEKS (2018), [Link]
guide/ [[Link] For more explanation on gas, see Gavin Wood,
Ethereum: A Secure Decentralised Generalised Transaction Ledger, BYZANTIUM VERSION 5, 7
(2019), [Link] [[Link]
MVVS]
61. E.g., Rosic, supra note 60.
62. Vitalik Buterin, Toward a 12-Second Block Time, ETHEREUM BLOG (July 11, 2014),
[Link] [https://
[Link]/94TR-9EWG].
63. A year ago, on March 29, there were only 58 million reported accounts on Ether-
eum. ETHERSCAN, [Link] [[Link]
(last visited Apr. 6, 2020).
64. M. Szmigiera, Number of Blockchain Wallet Users Globally 2016– 2020, STATISTA
(May 19, 2020), [Link]
wallet-users/ [[Link]
65. Ameer Rosic, What is Cryptoeconomics? The Ultimate Beginners Guide,
BLOCKGEEKS (2017), [Link] [https://
[Link]/MJ9E-QNJZ].
66. E.g., DE FILIPPI & WRIGHT, supra note 38, at 25– 26.
12 Cornell International Law Journal Vol. 53

incentive mechanism could be incorporated in any blockchain.

Bitcoin and Ethereum have created “built-in incentive mechanisms” to
encourage miners to get involved in the proof of work consensus.67 “Mem-
bers . . . receive compensation for storing data” and those who “voluntarily
agree to store small portions of files (called chunks or shards), which are
reassembled on demand by these decentralized file-sharing protocols” are
provided with even greater compensation.68 Hence, there are numerous
activities for which those operating or supporting blockchains may be
rewarded. The gas system on Ethereum also represents an incentive
mechanism.
Any peer-to-peer system which operates based on proof of work is
dependent on the work of its miners. The more miners there are in the
system, who can provide hash and security for the system, the faster the
system. In order to attract more miners into the system, and make the sys-
tem profitable, Ethereum provides two ways that miners can make money:
either by mining the blocks, or by becoming temporary dictators of their
mined blocks. The first way— mining the blocks— works the same as for
Bitcoin, where the miners are rewarded for each hash they create, and a
miner must dedicate processing power to verify the transactions and carry
out the mathematical puzzle associated with each block.69 The second way
for generating a reward is connected to the smart contracts on Ethereum,
where a miner becomes responsible for putting transactions inside their
block— meaning that they need to use their computational power to vali-
date smart contracts on that block.70 The gas system allows them to
charge a certain fee. In the gas system, a person who needs to pay for the
transaction pays for the gas, that gas is later converted into Ethers for min-
ers.71 These reward methods are not problematic in and of themselves, but
they raise questions about the level of decentralization and security of
blockchains. Therefore, before an incentive mechanism is coded into a
blockchain architecture, it should be carefully thought-through.
Nakamoto, foreseeing the popularity of the reward system where the
miners use just the computational power of their computers, ensured that
Bitcoin (and Ethereum as well) would increase the difficulty of the mathe-
matical puzzle that yields hash, and the difficulty of adding blocks to the
blockchain, as the network grew.72 This means that the more miners there

67. Id. at 30.

68. Id. See also VIKTOR TRON´ ET. AL, SWAP, SWEAR, SWINDLE: INCENTIVE SYSTEM FOR
SWARM 10– 11 (2016).
69. See Ioannis Lianos, Blockchain Competition: Gaining Competitive Advantage in the
Digital Economy— Competition Law Implications, in REGULATING BLOCKCHAIN: TECHNO-
SOCIAL AND LEGAL CHALLENGES 329, 337– 39 (Phillip Hacker et al. eds., Oxford Univ.
Press 2019). See generally BIKRAMADITYA SINGHAL ET AL., BEGINNING BLOCKCHAIN: A BEGIN-
NER’S GUIDE TO BUILDING BLOCKCHAIN SOLUTIONS (Apress 2018).
70. E.g., DE FILIPPI & WRIGHT, supra note 38, at 4.
71. Id. at 28– 29.
72. See Juan Garay et al., The Bitcoin Backbone Protocol with Chains of Variable Diffi-
culty, in 1 ADVANCES IN CRYPTOLOGY– CRYPTO 2017 291, 292– 93 (Jonathan Katz &
Hovav Shacham eds., Springer 2017); Jimi S., Blockchain: The Mystery of Mining Diffi-
culty and Block Time, GOODAUDIENCE (Sept. 24, 2018), [Link]
2020 Corporations on Blockchain 13

are, the more challenging the puzzle becomes and the more computational
power the miner needs to commit to solving the puzzle. As a result, miners
started to organize themselves into mining pools, combining their compu-
tational resources and thereby increasing the probability that they would
earn a reward.73 Once the pool earns a reward, it divides it among the
members of the pool.74 Here lies the problem: the bigger the pool, the big-
ger its computational power, and possibly, its control over the blockchain.
On January 2019, Ethereum was de facto controlled by two mining pools
that collectively controlled more than 50% hashrate (the ability to create
hash).75 This reality makes it justifiable to question the level of decentrali-
zation, or rather centralization, on a public blockchain and its autonomy,
which for many users is essential. A second part of the pool phenomenon
is that the bigger and more powerful the pool becomes, fewer new miners
will be interested in participating, as their chance of gaining any reward
becomes minimal, or, in case they join a pool, such reward will be divided
among many more miners rendering it less profitable. Naturally, the con-
centration of hashrate represents a concern of overall control on a
blockchain. The pools can jointly decide to create a block or not to create a
block, but the ability to trace those who have decided so may be limited,
and so is the enforcement mechanism for anyone who has suffered loss
due to such decision.
A further concern with the existing incentive mechanism is the grow-
ing cost. Initially, the fees remained relatively low, costing users only a
couple of cents to store information, engage in transactions, or execute a
smart contract.76 However, as the blockchains grow and the number of
transactions— which require more computational power from miners—
increases, the costs grow. Based on the economics of supply and demand,
logic dictates that when these transaction fees increase, the use of these
blockchains ultimately becomes less attractive.
These issues are solvable and might be addressed differently in differ-
ent blockchains.77 Nonetheless, they represent a concern from the incen-

blockchain-the-mystery-of-mining-difficulty-and-block-time-f07f0ee64fd0 [https://
[Link]/G8DS-YRV6].
73. Judmayer, supra note 27, at 38.
74. Id.
75. See Layla Harding, Ethereum is Centralized: 2 Mining Pools Control More Than
50% Hashrate, COINNOUNCE (Jan. 7, 2019), [Link]
ized-2-mining-pools-control-more-than-50-hashrate/ [[Link]
There are several larger mining pools: “Ethermine controls around 28% of the total net-
work hash rate while SparkPool controls more than 24% of the total hash rate.” The
third biggest pool is NanoPool with 13.54% total hash rate. Id.
76. See PEDRO FRANCO, UNDERSTANDING BITCOIN: CRYPTOGRAPHY, ENGINEERING AND
ECONOMICS 154– 55 (Wiley 2015).
77. Ethereum aimed to move from proof of work concept to proof of stake. In proof
of stake, miners do not commit with computational power, but with their money, which
renders the system much more energy efficient. The proof of stake works by way of
miners storing their Ethers in a wallet through the process of mining. If a miner does not
follow consensus rules and acts maliciously in any way, they risk losing all their stored
Ethers. Ethereum planned to introduce the proof of stake algorithm for consensus more
than two years ago, but still has not adopted it. The more recent expectations are to
14 Cornell International Law Journal Vol. 53

tive perspective and that of creating a secure, autonomous, and

decentralized infrastructure.

E. Limitations of Blockchain
Opening an account on a blockchain can be as easy as opening an
email account. Blockchain offers an open and interoperable protocol that
provides access for users to open their pseudonymous accounts, which are
secured by public and private key cryptography (a password).78 However,
as described above, the system has its challenges— which are further dis-
cussed in this section.

1. Speed
One of the main weaknesses of blockchain has been its speed. Bitcoin
blockchain has extremely slow updates, which take place every ten min-
utes.79 Therefore, subsequent blockchain-based projects, including Ether-
eum, were launched with the hope of solving this limitation. Ethereum
blockchain has solved the issue of speed, as it is updated roughly every
twelve seconds.80 For some, this might still seem like a long time. Never-
theless, Ethereum proves that the issue of speed can be resolved.

2. Power & Scalability

In addition to the issue of speed, existing blockchains are not as pow-
erful as other data management technologies.81 The blockchain networks
handle comparatively few transactions. For instance, the “Ethereum
blockchain processes roughly 500,000 transactions per day,”82 which is a
fraction of the trillions of activities carried out on the Internet each day, or
the 150 million daily transactions (averaging at more than 24,000 transac-
tions per second) handled by credit card companies such as Visa.83 There-
fore, for blockchain to become a widely-adopted technology, it would have
to be able to handle a similar number of transactions; but solving this
scalability issue is not an easy task.84

adopt the PoS sometime in 2020 or 2021. See Daniel Won, Ethereum Proof of Stake Date:
Date + What You Need to Know, EXODUS (Feb. 21, 2020), [Link]
ethereum-proof-of-stake-date/ [[Link]
78. See Pilkington, supra note 46, at 226; DE FILIPPI & WRIGHT, supra note 38, at
14– 15.
79. See Buterin, supra note 62.
80. Id.
81. Cf. DE FILIPPI & WRIGHT, supra note 38, at 56.
82. Introduction to Ethereum Scaling, DISTRICT0X EDUC. PORTAL, [Link]
[Link]/general-topics/ethereum-scaling/introduction-to-ethereum-scaling/
[[Link] The amount of transactions fluctuates. See Ethereum
Transactions Historical Chart, BITINFOCHARTS, [Link]
[Link] [[Link] (last visited May 26, 2020).
83. Power Your Retail Business Beyond the Point of Sale, VISA, [Link]
run-your-business/small-business-tools/[Link] [[Link]
(last visited May 26, 2020).
84. DE FILIPPI & WRIGHT, supra note 38, at 56.
2020 Corporations on Blockchain 15

3. Costs
Developing blockchain technology is far from simple or cheap. Based
on my understanding, developing a new blockchain corporate solution
includes, at the minimum, the following parts: (i) infrastructure, (ii) stor-
age space, (iii) network speed, (iv) P2P network, (v) encryption, (vi) smart
contracts, and (vii) user-friendly front-end.85 There are currently different
companies that offer developing corporate (private) blockchain solutions,
which cost anywhere from $500,000 to tens of millions of dollars.86

4. Hacking
Anyone willing to modify even a single record in the blockchain would
have to go through the computationally expensive task of generating new
hashes for every subsequent block in the blockchain. The more transac-
tions that occur on the network— and the more blocks appended to the
blockchain— the harder it becomes to retroactively modify previously
recorded transactions. Nevertheless, if mining pools are able to acquire
substantial computational power, there is a possibility that they may
change the blockchain. However, because the blockchain operates via con-
sensus, a possible attacker or group of attackers would need to rewrite the
transaction history of the blockchain at a pace that is faster than the major-
ity of honest nodes supporting the network. This means that the attackers
would have to have 51% of the computational power of the entire
blockchain.87 Given the growth of the network, orchestrating such an
attack today could cost hundreds of millions of dollars, if not billions,— an
operation that would presumably be far more costly than its potential out-
come.88 Additional cybersecurity vulnerabilities include wallet security,
private forks, double spending, network-level attacks, and many others.89

85. See generally id.

86. Established tech companies that have developed corporate blockchain solutions
include IBM and Accenture, and many start-ups, such as Insolar or Alchemy, have fol-
lowed suit. See, e.g., IBM, [Link] [https://
[Link]/7G6S-REJ8] (last visited July 19, 2020).
87. ANDREW KIM ET AL., THE STATELESS CURRENCY AND THE STATE: AN EXAMINATION OF
THE FEASIBILITY OF A STATE ATTACK ON BITCOIN 11– 14 (2014). The 51% attack (or Goldf-
inger) was first used to attack Bitcoin but can be used also on other blockchain systems.
When reliable nodes control at least 51% of the network mining power, a blockchain
system can then be considered protected. Otherwise an attacker might not only be able
to make changes to the blockchain, but also prevent transactions from being added to
the leading chain or obstruct the confirmation of new transactions on the network, thus,
in the case of Bitcoin, preventing some or all nodes from receiving funds. Id. at 7, 11– 12.
88. Id. at 13, 17– 19. See also Huru Hasanova et al., A Survey on Blockchain Cyber-
security Vulnerabilities and Possible Countermeasures, 29 INT’L J. NETWORK MGMT. 219
(2019) (“In July 2014, the mining pool [Link] briefly exceeded 50% of the Bitcoin
network’s processing power. . . . In August 2016, . . . Ethereum, Krypton, and Shift
suffered 51% attacks. An attempt was made to overwhelm the network with at least 51%
of the hashing power in order to roll back the transactions and spend the same coins
again. A severe case occurs when the attacker has more than 67% of the stake by which
the attacker can freely block any transactions and wish to block and reject to form any
blocks of the transactions.”).
89. For an overview of possible cybersecurity issues, see Hasanova et al., supra note
88, at 219.
16 Cornell International Law Journal Vol. 53

Ultimately, there continue to be cybersecurity challenges and the

potential for fraudulent and criminal activities throughout blockchain,
whether it is a Bitcoin blockchain or any other. For that reason, it is impor-
tant to realize that blockchains are still immature. If blockchains improve
in terms of speed, functionality, security, and accessibility, the technology
may, over the upcoming years, instruct organizations and corporations on
how to become more transparent and accessible, providing more informa-
tion and decision-making ability to shareholders. Developers, stakehold-
ers, and governments still have the possibility to shape emerging social and
regulatory norms relating to this technology. Policy objectives shall be
directed to the future of blockchain and how we imagine it should be
applied in our corporations, governments, and lives. Similar to the
Internet, blockchain will grow while simultaneously encoding laws, regula-
tions, and possibly values into its network, protocols, and associated smart
contracts. As any other technology, blockchain will continue to be
designed by humans.

II. Technology for Technology, or is There Purpose and Value?

Before initiating an analysis on the possible structure and risks of

blockchain for publicly traded companies, I would like to address the
added value of using technology for the purposes of achieving transparent
and fair corporate governance and enhancing the position of shareholders.
Looking around, we see more and more technology in our lives, in our
communication, in our education, our daily activities, everywhere. On an
organizational level, there is a belief that technology helps organizations
remain competitive, agile, and effective. Yet, can we truly prove such state-
ment? Companies are applying diverse methods to measure the value of
technology. With increased technology spending, companies are looking
for greater transparency and clearer governance practice. Implementing a
formal measurement framework means creating a consistent way of evalu-
ating current and future technologies in terms of how they affect busi-
nesses.90 However, how could we evaluate technology in terms of how
they affect voting and participation of shareholders, not only from the
quantifiable perspective, but also from the perspective of shareholders’
engagement, shareholder democracy, voting transparency, or security?
Could we also link the use of blockchain to shareholder voting in order to
evaluate the quality of corporate communication or management’s commu-
nication with shareholders? Going a step further, could we use this tech-
nology to assess the quality of the decision-making processes based on
greater shareholder participation? Could this technology increase the abil-
ity of shareholders to raise questions and change corporate policies? There

90. See generally, e.g., John G. Mooney et al., A Process Oriented Framework for Assess-
ing the Business Value of Information Technology, 27 ACM SIGMIS DATABASE: DATABASE
FOR ADVANCES INFO. SYS. 68 (1996); James W. Tipping et al., Assessing the Value of Your
Technology, 38 RES.-TECH. MGMT. 22 (1995).
2020 Corporations on Blockchain 17

are metrics that could be employed to address some of these issues;91 but
ultimately, we should ask whether blockchain furthers the policy goals of
corporate governance— such as limitation of information asymmetry and
enhanced transparency into decision-making— and whether blockchain
ultimately leads to greater shareholder involvement.92
In 1932, Adolf Berle and Gardiner Means, in their seminal work The
Modern Corporation and Private Property, concluded that the “usual stock-
holder has little power over the affairs of the enterprise and his vote, if he
has one, is rarely capable of being used as an instrument of democratic
control.”93 In contemporary scholarship, Professor Lucian A. Bebchuk
described shareholder power as a myth.94 In his empirical study on corpo-
rate voting, he stated that “[s]hareholders commonly do not have a viable
power to replace the directors of public companies.”95 In 2017, the United
States’ (U.S.) corporate retail investors comprised just 30% of the world’s
share ownership in comparison to the 90% they comprised at the time
Berle and Means wrote their book.96 This goes even further, as the institu-
tional investors voted on 90% of their shares, while retail investors only
voted on 29% of their shares,97 which renders their voice somewhere
around 10% in all. Yet, voting is the cornerstone of corporate governance,
accountability, and legitimacy.98 Public corporations and their directors
owe fiduciary duties to their shareholders— not only to the institutional
shareholders, but also the retail shareholders. Therefore, we should con-

91. As an example, there is a balanced scorecard, which is one of the formal mea-
surement frameworks, that relies upon a set of metrics and maps operating-unit per-
formance of corporate objectives. Different metrics can be weighted differently,
depending on the priorities of the organization.
92. Existing literature offers different accounts about the direction of corporate gov-
ernance and its policy goals. Ronald Gilson ascribes the transformation of U.S. corpo-
rate governance to changes in the operation of capital markets. See Ronald J. Gilson,
Catalysing Corporate Governance: The Evolution of the United States System in the 1980s
and 1990s, 24 COMPANY & SEC. L.J. 143, 149– 50 (2006). Jeffrey Gordon attributes the
rise of independent directors in the U.S. to greater information on stock market prices.
See Jeffrey N. Gordon, The Rise of Independent Directors in the United States, 1950– 2005:
Of Shareholder Value and Stock Market Prices, 59 STAN L. REV. 1465, 1469 (2007). Others
attribute the change to the enhanced importance of greater shareholder involvement.
See, e.g., Brian R. Cheffins, The History of Corporate Governance, in THE OXFORD HAND-
BOOK OF CORPORATE GOVERNANCE 46, 52 (Douglas Michael Wright et al. eds., Oxford
Univ. Press 2013).
93. ADOLF A. BERLE & GARDINER C. MEANS, THE MODERN CORPORATION AND PRIVATE
PROPERTY 83 (Routledge 3d ed. 2017) (1932).
94. Lucian A. Bebchuk, Essay: The Myth of the Shareholder Franchise, 93 VA. L. REV.
675, 732 (2007).
95. Id.
96. 2017 Proxy Season Review, BROADRIDGE 1, 2 (Sep. 2017), [Link]
[Link]/_assets/pdf/[Link] [[Link]
7GN4-AJBF].
97. Id.
98. On the importance of voting in modern corporations, see generally Lucian
Bebchuk et al., What Matters in Corporate Governance?, 22 REV. FIN. STUD. 783 (2008);
Daniel R. Fischel, The Corporate Governance Movement, 35 VAND. L. REV. 1259 (1982);
Oliver Hart, Corporate Governance: Some Theory and Implications, 105 ECON. J. 678
(1995).
18 Cornell International Law Journal Vol. 53

sider whether blockchain could serve as a more efficient infrastructure for

decision-making of shareholders and their respective Boards, and whether
it can contribute to a more diverse shareholder democracy. Depending on
the definition of democracy, and the division of corporate ownership
among diverse types of shareholders across different jurisdictions, the
answer will vary. Nevertheless, there are certainly several components of
shareholder democracy that can contribute to greater shareholder control,
including transparent records of shares, greater access to information, and
simpler voting mechanisms. In this section, I aim to reflect on these com-
ponents in light of blockchain technology, as well as on the benefits and
risks that blockchain represents for shareholders.

A. Transparent Records of Shares

Marcel Kahan and Edward B. Rock considered technology to record
stockownership as early as 2008, viewing it as a solution for many ongoing
problems related to companies’ inability to keep accurate and timely
records of share-ownership.99 In this context, there are several issues for
which blockchain could serve as a valuable solution. Ownership of shares
in publicly traded companies can sometimes become hazy, namely in
times of Annual General Meetings (AGMs), or General Meetings (GMs),
when mergers, acquisitions, or other major corporate decisions are being
discussed and voted on. Investors, or groups of investors, each having
diverse incentives, tend to use their information, influence, and vote for
their own benefit, disregarding the consequences for the corporation and
other shareholders.100
Blockchain technology could provide a transparent overview of own-
ership. All of the shareholders of a publicly traded company would be visi-
ble, while also allowing for the real-time observation of transfers of shares
from one owner to another.101 Managerial ownership would also become
more transparent. The stock ownership would be constantly updated
among all of the nodes in the blockchain. It is for consideration which

99. Marcel Kahan & Edward B. Rock, The Hanging Chads of Corporate Voting, 96
GEO. L. J. 1227, 1278 (2008).
100. See, e.g., Abha Bhattarai, Private Equity’s Role in Retail Has Killed 1.3 Million Jobs,
Study Says, WASH. POST (July 24, 2019, 11:16 AM), [Link]
business/2019/07/24/private-equitys-role-retail-has-decimated-million-jobs-study-says/
[[Link] (depicting a study that reviewed the effects of decision-
making of corporations that have been acquired by private equity firms, and their disre-
gard for employees or long-term investment in their target companies). See also Jim Baker
et al., Pirate Equity: How Wall Street Firms are Pillaging American Retail, UNITED RESPECT
(2019), [Link]
[Link] [[Link]
49CR].
101. One of the first initiatives in this regard started in Delaware where, in May 2016,
the Delaware Blockchain Initiative was launched to enable companies to authorize and
distribute their shares directly to investors via the Internet. See Michael del Castillo,
Delaware House Passes Historic Blockchain Regulation, COINDESK (July 1, 2016, 2:54 PM),
[Link]
[[Link]
2020 Corporations on Blockchain 19

form the blockchain should undertake.102 Yet, irrespective of the type of

blockchain, the real-time database of transactions and their character
would yield more reliable and complete information about ownership than
is currently available, and such information would be visible to the share-
holders, and possibly to all the market participants.103 These accurate
records would support and further emphasize the necessity for proper
information disclosure to the markets and to the shareholders.
This development would positively not only affect the corporations
themselves, but would also be relevant to the new wave of beneficial own-
ership regulation which is being adopted across the world with the view
that increased transparency in share-ownership prevents money launder-
ing and terrorist financing.104 Many governments have been focusing on
the formal reporting of beneficial ownership and forcing companies to
assess their structure and ensure they meet varying disclosure require-
ments.105 An important piece of such legislation has been the European
Union’s (EU) Fourth Anti-Money Laundering Directive, which, among
other things, requires all EU member states to set up registers listing the
ultimate beneficial owners (UBOs) of all legal entities.106 Blockchain tech-

102. See discussion infra Section III.A.

103. In a majority of the markets, corporate shares have been “immobilized” and are
usually held by securities depositories. Therefore, in these markets, corporate shares are
issued in the name of central depositories, their nominees, or the participants in the
settlement system. Hence, most shares are not held in the name of their owners, the
shareholders, but in the name of their intermediaries. In the few jurisdictions where
shares are not issued in the names of the intermediaries, they are usually, for tax pur-
poses, credited to the intermediaries’ accounts. This includes the case where a broker
holds the shares in the name of his or her investors. Ultimately, this contributes to a
very unclear overview of the relationships in a corporation. See Frederico Panisi et al.,
Blockchain and Public Companies: A Revolution in Share Ownership Transparency, Proxy
Voting and Corporate Governance?, 2 STAN. J. BLOCKCHAIN L. & POL’Y 189, 189– 90
(2019).
104. According to the World Bank Group, over a trillion U.S. dollars flow through
diverse jurisdictions and shell companies by way of tax evasion, money laundering, cor-
ruption, and a myriad of other crimes. Corrupt Money Concealed in Shell Companies and
Other Opaque Legal Entities, Finds New StAR Study, WORLD BANK (Oct. 24, 2011), https:/
/[Link]/en/news/press-release/2011/10/24/corrupt-money-concealed-in-
shell-companies-and-other-opaque-legal-entities-finds-new-star-study [[Link]
JTD3-9D2V]. Countries across the world have adopted Beneficial Ownership Guides to
tackle this enormous problem. See Beneficial Ownership Guides, GLOBAL F. ON ASSET
RECOVERY, [Link] [https://
[Link]/8NTH-2Q5D].
105. For an overview over national approaches toward beneficial ownership, see gen-
erally Anti-Corruption Initiatives: Beneficial Ownership, OPEN GOV’T PARTNERSHIP, https://
[Link]/wp-content/uploads/2019/05/Global-Report_Beneficial-
[Link] [[Link] Best Practices on Beneficial Ownership
for Legal Persons, FIN. ACTION TASK FORCE 1 (Oct. 2019), [Link]
media/fatf/documents/[Link] [https://
[Link]/F6LC-HVDD]; Legal Approaches to Beneficial Ownership Transparency in EITI
Countries, EXTRACTIVE INDUS. TRANSPARENCY INITIATIVE 1 (June 2019), [Link]
files/documents/legal_approaches_to_beneficial_ownership_transparency_in_
eiti_countries.pdf [[Link]
106. Directive 2015/849 of the European Parliament and of the Council of 20 May
2015 on the Prevention of the Use of the Financial System for the Purposes of Money
Laundering of Terrorist Financing, Amending Regulation No 648/2012 of the European
20 Cornell International Law Journal Vol. 53

nology would represent a solution for the UBO challenge.

Secondly, an important factor of publicly disclosing the owners of
shares is that minority shareholders would immediately know what their
ownership amount is and could thereby have immediate access to their
rights. Even though the degree of protection of minority shareholders var-
ies among jurisdictions, minority shareholders are becoming more active
and increasingly ready to protect their interests.107 A significant advantage
of the decentralization of a blockchain is that it grants equal opportunity
for everyone to involve themselves in the decision-making.108 Blockchain
could furthermore facilitate communication among the minority
shareholders.
In regard to minority shareholders, blockchain could have both posi-
tive and negative effects on activist shareholders. The technology would
provide an overview of the existing shareholders, opening up access to
their information and making it possible to contact them directly. This
could facilitate the sale of shares,109 but it could also pose a challenge for
activist shareholders, as they often try to control the timing of their self-
identification in order to take Boards by surprise.110 Nevertheless,
blockchain would allow activist shareholders to liquidate their position
more easily. Thus, share manipulation would be quicker but more easily
detectable. Moreover, any backdating of stock compensation would
become impossible because, on a blockchain, rewriting the history is
extremely complicated, if not unattainable. But ultimately, transparency
and information accuracy would benefit both, the shareholders and the
markets.

B. General Meeting: Information & Participation

Corporate law provides for a formalized, legal model of power sharing
between the Board and the shareholders where the Board is hired by, and is
accountable to, the company’s owners (the shareholders) at the company’s
general meeting. General meetings have an important role in corporate
governance as they have three main functions: (i) to inform shareholders
about the state of the corporation, (ii) to provide a venue for discussion

Parliament and of the Council, and Repealing Directive 2005/60/EC of the European
Parliament and of the Council and Commission Directive 2006/70/EC, 2015 O.J. (L
141) 1, 13.
107. Delaware Supreme Court Issues Favorable Ruling in Dell Merger Appraisal Action,
ANALYSIS GRP. (Dec. 21, 2017), [Link]
delaware-supreme-court-issues-favorable-ruling-in-dell-merger-appraisal-action/ [https://
[Link]/DU6A-B22X]; Christoph Van der Elst & Anne Lafarre, Blockchain and Smart
Contracting for the Shareholder Community 2 (European Corp. Governance Inst., Working
Paper No. 412, 2018).
108. Cf. Blockchain Technology in Online Voting, FOLLOW MY VOTE, [Link]
[Link]/online-voting-technology/blockchain-technology/ [[Link]
P2SA-ZPGD].
109. Cf. Alex Edmands et al., The Effect of Liquidity on Governance, 26 REV. FIN. STUD.
1443, 1469 (2013).
110. See David Yermack, Corporate Governance and Blockchains 22– 24 (Nat’l Bureau
of Econ. Research, Working Paper No. 21802, 2015).
2020 Corporations on Blockchain 21

and inquiries, and (iii) to gather members for decision-making. After the
2008 financial crisis, more and more legislators have realized that
increased oversight over Boards’ decisions is necessary. Hence, the last
years have seen a series of legislative measures to increase the accountabil-
ity of the Boards. These measures include requirements that Boards’ com-
pensation be subject to review and approval by shareholders,111 or the
requirement that Board members submit themselves for reelection each
year.112 Boards are also being required to disclose all material information
more efficiently to their shareholders and to the markets. For a long time,
transparency and disclosure have been accepted as the functional pillars
of our financial markets.113 They provide a basis on which the sharehold-
ers and other stakeholders can make informed decisions and hold corpo-
rate executives accountable, and thus limit the agency costs associated
with omnipresent information asymmetry.114 Transparency consists of
five elements: “(i) truthfulness, (ii) completeness, (iii) materiality of infor-
mation, (iv) timeliness, and (v) accessibility.”115 Implementing blockchain
within a corporation could, at minimum, advance the timeliness and acces-
sibility of corporate information.116 If all the shareholders are on the
blockchain, they would be provided with timely and simple access to vari-
ous documents, which would be timestamped, and thus any later change
in the ledger would be traceable. Blockchain does not directly affect the
truthfulness or materiality of the information, but it allows shareholders to

111. This new rule is popularly referred to as “say on pay,” which requires the share-
holder body at its General Meeting to vote on the compensation packages. This rule has
been adopted in numerous jurisdictions, including the U.S., U.K., Australia, Denmark,
Sweden, and the Netherlands. The U.K. was the first jurisdiction to introduce a non-
binding version of this rule. See generally Companies Act 2006, c. 9, § 439 (U.K.) (infer-
ring that, as of October 2009, “say on pay” vote was made binding on all listed compa-
nies in the U.K.). This was later followed by Australia in 2004. See Corporation Act 2001
(Cth) ss 250R (2), 250R(3) (Austl.). And the U.S. in 2010. See generally Dodd-Frank Wall
Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376
(2010). For other jurisdictions, see Jim Corkery & Sabina Medarevic, Executive Remuner-
ation Under Scrutiny: The Cutting Edge of the ‘Shareholder Spring’, CORP. GOVERNANCE
EJOURNAL, 2013, at 1, 9– 10.
112. The U.K. Corporate Governance Code requires all Board Members of Standard
and Poor’s 350 companies to submit themselves for reelection every year. In Australia, if
25% of the shareholders’ vote is against adopting the company’s remuneration report at
two successive AGMs, the shareholders have the right to vote out the Board. See Corpora-
tion Act 2001 (Cth) s 250U (Austl.).
113. See, e.g., Stephen M. Bainbridge, Mandatory Disclosure: A Behavioral Analysis, 68
U. CIN. L. REV. 1023, 1023 (2000); Frank H. Easterbrook & Daniel R. Fischel,
Mandatory Disclosure and the Protection of Investors, 70 VA. L. REV. 669, 669 (1984);
Gary F. Goldring, Mandatory Disclosure of Corporate Projections and the Goals of Securi-
ties Regulation, 81 COLUM. L. REV. 1525, 1525– 26 (1981).
114. See generally Robert E. Verrecchia, Essays on Disclosure, 32 J. ACCT. & ECON. 97
(2001); Michael Welker, Disclosure Policy, Information Asymmetry, and Liquidity in
Equity Markets, 11 CONTEMP. ACCT. RES. 801 (1995); Joseph E. Stiglitz, Information and
the Change in the Paradigm in Economics, 92 AM. ECON. REV. 460 (2002).
115. Fiammetta S. Piazza, Bitcoin and the Blockchain as Possible Corporate Governance
Tools: Strengths and Weaknesses, 5 PA. ST. J.L. & INT’L AFF. 262, 289 (2017). See also
Benjamin Fung, The Demand and Need for Transparency and Disclosure in Corporate Gov-
ernance, 2 UNIVERSAL J. MGMT. 72, 75– 76 (2014).
116. See generally Piazza, supra note 115.
22 Cornell International Law Journal Vol. 53

easily acquire information and, at the same time, monitor transactions and
decisions, and recognize possible breaches.117
Even though regulations require publicly traded companies to hold
AGMs annually, participating in them can be challenging since many pub-
licly traded companies have a large number of individual shareholders
coming from all over the world. While we observe the increasing impor-
tance and power of minority shareholders, the dispersion of ownership
continues to represent a challenge, which proxy firms love to utilize. Gen-
eral meetings are the primary place for shareholder engagement. Yet, the
engagement and participation are precarious. Therefore, the use of a new
and innovative blockchain solution, where shareholders cannot only vote,
but truly participate, share information, raise questions, and affect deci-
sion-making could prove beneficial. Naturally, in the context of corpora-
tions with hundreds of thousands of shareholders, even technology will not
solve the issue of dispersion of ownership and interest, but it could possi-
bly facilitate greater involvement and communication. In a world of decen-
tralized autonomous consensus, collective decision-making could become
more prominent, resulting in greater shareholder democracy while main-
taining security and transparency.
Shareholder participation is another important element of sound cor-
porate governance, both for decision-making and for supervision. Share-
holders represent an efficient tool for capital market oversight,118 which
should also be supported at the policy level. Rational apathy is present
among many shareholders as they assume that their small stake will have
minimal impact on the result of an election.119 Based on a simple, cost-
benefit analysis, it is illogical for these shareholders to review all the infor-
mation provided by the Boards and spend their time on the activities con-
nected to general meetings given their small stake and impact in the
company.120 Hence, for them, it makes sense to only be interested in divi-
dends and leave the decision-making to those more informed. However, a
new architecture that would not only store the records and provide for
information-sharing and voting, but would also encompass incentive mech-
anisms for those actively involved (as the nodes in a Bitcoin) could drasti-
cally alter the system.
Blockchain could serve as a viable substitute for the archaic mail vot-
ing or corporate proxy voting system that continues to be present and uti-
lized in the majority of global jurisdictions today. It might not necessarily
be welcomed by all parties involved, but it could contribute to greater

117. See supra Part I.A.

118. See, e.g., John C. Coffee, Law and the Market: The Impact of Enforcement, 156 U.
PA. L. REV. 229, 294 (2007); James D. Cox et al., Public and Private Enforcement of Secur-
ities Laws: Have Things Changed Since Enron? 80 NOTRE DAME L. REV. 893 (2005).
119. Yaron Nili & Kobi Kastiel, In Search of “Absent” Shareholders: A New Solution to
Retail Investors’ Apathy, 41 DEL. J. CORP. L. 55, 57 (2016).
120. See Dirk Zetzsche, Shareholders Passivity, Cross-Border Voting and the Shareholder
Rights Directive, 8 J. CORP. L. STUD. 289, 296 (2008). Cf. Joan MacLeod Heminway &
Adam J. Sulkowski, Blockchains, Corporate Governance, and the Lawyer’s Role, 65 WAYNE
L. REV. 17, 26– 27 (2019).
2020 Corporations on Blockchain 23

transparency in decision-making. In several countries, electronic voting

has been introduced,121 but it has not proved to be a true solution for
shareholder apathy.122 According to Professor Dirk Zetsche, the number
of active shareholders has not substantially changed.123 Shareholders con-
tinue to be disinterested and apathetic towards voting on general meetings
if they do not own a substantial stock of shares.124 This suggests that the
issue of inactive shareholders and the dominance of major shareholders is
a phenomenon not based on the inability to physically participate, but
rather due to the awareness of one’s limited power and the cost-benefit
analysis previously discussed. However, what if the system did not only
resolve the digital versus analogue voting debate, but was rather a system
designed to facilitate and incentivize shareholder participation? These
incentives could perhaps take the form of higher dividends, additional
tokens, or some other rights.125 Blockchain itself is an incentive-based
architecture. Moreover, blockchain is compatible with mobile platforms,
which could also have a positive impact on voting since access to voting on
a mobile phone could increase the convenience of exercising one’s voting
right.126

C. Shareholder’s Vote: Proxy & Correct Calculations

Another reality of today’s corporate world is the existing voting mecha-
nism. Previously, shareholders were voting in person at the meeting, but
nowadays, the majority of shareholders cast their votes through a proxy.
The proxy system is present not only in the U.S., but in a majority of juris-
dictions around the world.127 This voting arrangement is a result of a sys-

121. See Zetzsche, supra note 120.

122. Id. at 335.
123. Id.
124. Id. at 293.
125. A token is a unit of value that represents an asset or utility in digital form. At the
simplest level, tokens can be divided into utility tokens and security tokens. A utility
token is a “coin” backed by a specific project. However, in the context of voting and
corporate governance, the use of security tokens would be more appropriate. A security
token represents a share in the company that issued the token. It represents a financial
security in a digitalized form. They perform the same function and include the same
rights as the securities that they represent. Yet, they are easier to transfer because it can
all be done in digitized form. The security tokens are much more regulated than the
utility tokens. See Toshendra Kumar Sharma, Security Tokens vs. Utility Tokens: A Concise
Guide, BLOCKCHAIN COUNCIL, (Sept. 6, 2019), [Link]
blockchain/security-tokens-vs-utility-tokens-a-concise-guide/ [[Link]
SHEN].
126. Erik Kuebler, Making Voting, Elections Both Secure and Accessible with Blockchain
Technology, BITCOIN MAG. (Jan. 11, 2018), [Link]
voting-elections-both-secure-and-accessible-blockchain-technology [[Link]
BQ48-2CEA].
127. For an overview of the European proxy market, see Discussion Paper: An Over-
view of the Proxy Advisory Industry: Considerations on Possible Policy Options, EUR. SEC. &
MKT. AUTHORITY 5 (2012), [Link]
2015/11/[Link] [[Link] (providing an overview of the
functioning of the proxy advisory industry in Europe). See generally Peter Cziraki et al.,
Shareholder Activism Through Proxy Proposals: The European Perspective, 16 EUR. FIN.
24 Cornell International Law Journal Vol. 53

tem where shares are usually held by diverse intermediaries such as banks,
brokers, or investment companies on behalf of their owners— the share-
holders. The system of intermediaries is often endless because it needs an
array of additional third parties, including: brokers, custodians, securities
depositories, transfer agents, proxy service provides, proxy advisory firms,
proxy solicitors, and vote tabulators.128 Each of these parties brings into
the relationships their own interests, additional costs, and more opportuni-
ties for mistakes. In order to understand the machinery, in 2018, 482 bil-
lion share proxies were handed in within 4,108 shareholder meetings in
the U.S.129 The Depository Trust and Clearing Corporation (DTCC),
according to their data from 2018, provided custody and asset services to
more than 130 countries making over $57 trillion.130 Although this system
has been facilitating the trading, clearing, and settlement of securities for
many decades, these benefits come at the cost of substantially obstructing
shareholder voting rights.131
Given that the majority of shareholders keep their shares through
diverse intermediaries, these intermediaries are ultimately the ones who
cast the votes.132 In addition, these intermediaries are also entitled to com-
municate with each other about the performance of management, and dis-
cuss mergers and acquisitions without the fear of liability for improper
solicitation of proxies.133 Institutional investors view their voting as part
of their strategy rather than as a representation of the shareholders’ inter-
ests.134 As mentioned, the representation of shareholders’ interests by
forms of proxies is universal. The European Commission has also been

MGMT. 738 (2010) (analyzing various corporate governance issues that have been
caused by newly initiated proxy proposals across corporations in Europe).
128. See Concept Release on the U.S. Proxy System, Exchange Act Release No. 34-
62495, Investment Advisers Act Release No. 3052, Investment Company Act Release No.
29340, 98 SEC docket 3027, at 8 (July 14, 2010), available at [Link]
rules/concept/2010/[Link] [[Link] [hereinafter Concept
Release on the U.S. Proxy System].
129. 2018 Proxy Season Key Statistics and Performance Rating, BROADRIDGE (2018),
[Link] [https://
[Link]/3L58-FH2B].
130. Our Capabilities, DEPOSITORY TR. & CLEARING CORP. (2018), [Link]
[Link]/~/media/Files/Downloads/About/DTCC_Capabilities.pdf [[Link]
2C3D-TMQJ].
131. For more on the proxy system, see Spencer J. Nord, Blockchain Plumbing: A Poten-
tial Solution for Shareholder Voting?, 21 U. PA. J. BUS. L. 706, 710– 18 (2019); R. Franklin
Balotti & J. Travis Laster, Professor Coates Is Right. Now Please Study Stockholder Voting,
54 U. MIAMI L. REV. 819, 833– 837 (2000). See generally Jill E. Fisch, From Legitimacy to
Logic: Reconstructing Proxy Regulation, 46 VAND. L. REV. 1129 (1993) (describing the
geographic dispersion as a tool for limiting shareholders’ voting).
132. In a majority of institutional investors, there are specialized proxy departments
and teams that are responsible for implementing the proxy voting and engagement
guidelines.
133. Commission Interpretation and Guidance Regarding the Applicability of the
Proxy Rules to Proxy Voting Advice, Exchange Act Release No. 34-86721, 84 Fed. Reg.
47416 (Sept. 10, 2019).
134. Cf. Edward B. Rock, Institutional Investors in Corporate Governance, in THE
OXFORD HANDBOOK OF CORPORATE LAW AND GOVERNANCE 363, 374 (Jeffrey N. Gordon &
Wolf-Georg Ringe eds., Oxford Univ. Press 2018).
2020 Corporations on Blockchain 25

frustrated by shareholder apathy and aims to address the lack of share-

holder engagement.135 Hence, looking at the existing voting mechanism,
we can surely conclude that individual shareholders truly lack any power
over decision-making.
With blockchain technology, the entire system could be completely
reformed and made “more responsive.”136 It would be the shareholders
who would cast the vote instead of other intermediaries with their own
incentives. Individual shareholders could communicate directly and
securely among themselves and with the Board. “Votes could be instanta-
neously recorded on a blockchain, making elections” simple and accessi-
ble.137 Meetings could be done virtually, live-streamed with active
interactions, and with less control from institutional investors.138 “Requi-
site votes could be entered remotely, using a blockchain as a secure data
store, and subsequently tallied in real-time in a trusted way.”139 Technol-
ogy “could make corporations more dynamic” and transparent.140 Existing
restrictions, direct or indirect, could be lessened and shareholders’ individ-
ual voices could be heard. This could have a substantial effect on their
activism and involvement as well as provide a platform for legitimate share-
holder concerns and interests. Blockchain could bring more efficient coor-
dination to shared resource pools and enable new models of non-
hierarchical governance that are present in Nordic countries, and thus
allow equitable division of power and profit in the future. Blockchain has
already been presented by several institutions as a platform for voting in
various types of elections.141 Could this be the tool for greater shareholder
democracy?
Some might claim that the current system works and that the system is
secured by several gatekeepers on the market. But studies and news
reports are showing otherwise. Marcel Kahan and Edward Rock have doc-
umented the many problems of existing corporate elections, which
includes an inexact voter (shareholder) list.142 This would be easily

135. The European Commission has submitted a proposal to amend the Shareholder
Rights Directive. See Proposal for a Directive of the European Parliament and of the Council
Amending Directive 2007/36/EC as Regards the Encouragement of Long-Term Shareholder
Engagement and Directive 2013/34/EU as Regards Certain Elements of the Corporate Gov-
ernance Statement, COM (2014) 213 final (Apr. 9, 2014).
136. Aaron Wright & Primavera De Filippi, Decentralized Blockchain Technology and
the Rise of Lex Cryptographia, SOC. SCI. RES. NETWORK 1, 37 (2015), https://
[Link]/abstract=2580664 [[Link]
137. Id.
138. Id.
139. Id.
140. Id.
141. Stock exchanges, as well as custodian intermediaries, have been outlining their
vision for blockchain infrastructure. “During the ‘Open Day 2015’ IT Conference, Deut-
she Börse Group presented its corporate voting proxy prototype.” See Anne Lafarre &
Christoph Van der Elst, Blockchain Technology for Corporate Governance and Shareholder
Activism 20 (Eur. Corp. Governance Inst., Working Paper No. 390, 2018). Nasdaq, the
Australian Stock Exchange, the Japan Exchange Group, the London Stock Exchange, and
the Moscow Exchange have been working on similar projects. Id. at 20, n.72.
142. See Kahan & Rock, supra note 99, at 1254– 55.
26 Cornell International Law Journal Vol. 53

solved if shareholder ownership was recorded on blockchain. The speed of

blockchain would provide an exact overview of the shareholders.143 The
list of problems with the current voting scheme continues. Incomplete dis-
tribution of ballots and chaotic vote tabulation are among the key con-
cerns.144 Once corporations receive votes, state laws in the U.S. require
that a vote tabulator or an inspector of election is hired to officially collect
and count both, proxy votes and votes delivered by shareholders in person
at a shareholder meeting.145 The tabulator is responsible for the accuracy
of the voting, which continues to be problematic.
There have been various high profile controversies involving errors in
vote tabulation,146 including one in 2008 after a tense proxy fight for con-
trol of Yahoo! Inc.147 In this case, an independent vote tabulator, which
Yahoo had employed, had miscounted votes by “about 20% of the total
vote, with roughly twice as many votes withheld from the chairman and the
CEO as first reported.”148 This was not a rare case, at least not with
regards to publicly traded companies that have thousands of hundreds of
investors.149 Even the Securities and Exchange Commission (SEC)
acknowledged that it is unable to confirm whether the vote of a share-
holder was cast as instructed.150 In fall of 2018, the SEC held a roundtable
focused on the U.S. proxy system, including the “mechanics and technol-
ogy” of the system.151 The SEC observed the major problems in the sys-
tem, yet it has not found a solution that would address them efficiently.152
The fact that in the twenty-first century, we are unable to address the accu-
racy of voting mechanism remains puzzling.
As Ken Bertsch, Executive Director of the Council of Institutional
Investors, explained before the SEC Investor Advisory Committee, we are

143. Id. at 1235.

144. Id. at 1255.
145. See Nord, supra note 131, at 717.
146. These cases involve annual meetings and voting controversies of CSX Corp. in
2008, Washington Mutual in 2008, and Transkaryotic Therapies in 2005. See Richard
W. Barrett, Elephant in the Boardroom?: Counting the Vote in Corporate Elections, 44 VAL.
U. L. REV. 125, 126– 27 (2009). Additional controversies occurred in the Procter and
Gamble Co. proxy fight of 2017. Donald Pierce, Protecting the Voice of Retail Investors:
Implementation of a Blockchain Proxy Voting Platform, RUTGERS BUS. L.J., 2018– 2019, at
1, 7.
147. Barrett, supra note 146, at 125– 26. After Yahoo’s annual meeting, the company
declared that CEO Jerry Yang had received 85.4% of the shares voted. Id. at 125.
148. Id. at 126. See also Benjamin Pimentel & Dan Gallagher, Yahoo Board Vote Count
Sharply Revised, MARKETWATCH, (Aug. 5, 2008, 7:21 PM), [Link]
com/story/votes-against-yahoo-board-much-higher-than-first-reported [[Link]
cc/8KVC-F8YT].
149. See Kahan & Rock, supra note 99, at 1279 (“Gil Sparks, a . . . Delaware lawyer,
estimates that, in a contest that is closer than 55 to 45%, there is no verifia[bility]” of the
election results.).
150. See Concept Release on the U.S. Proxy System, supra note 128, at 27 (“[I]t is not
currently possible to match a particular investor’s vote to a specific securities position
held at a securities depository.”).
151. See Spotlight on Proxy Process, SEC (Feb. 22, 2019) [Link]
roundtable-2018 [[Link]
152. Id.
2020 Corporations on Blockchain 27

certainly at a pivotal time in the future of proxy voting.153 Some scholars

perceive blockchain as a tool to eliminate all the existing middlemen,154
while others foresee that the roles of the intermediaries will simply
change.155 All these concerns can be addressed by blockchain architecture
and by defining the roles of the existing intermediaries. Yet, irrespective of
the structure, blockchain would substantially increase the transparency,
efficiency, and possibly also the legitimacy of the corporate system.

D. Costs
Another factor that cannot be ignored is the costs of blockchain. For
the time being, the costs continue to be substantial. To specify the costs of
both public and private blockchain solutions, one would need specific
inputs, including: (i) the transaction volume, (ii) the transaction size, (iii)
the node-hosting method, and (iv) the consensus protocol.156 To these,
one would need to add management costs, executive training costs, system
transitioning costs, and costs connected to the entire operation. Like any
other technological solution, the costs of blockchain would include not
only installation and setup, but would also include yearly maintenance,
cloud space, and monitoring costs. Depending on the size of a solution
and the additional add-ons, the cheapest solutions could cost from
$500,000 to several millions of dollars.157 Hence, the costs of a blockchain
continue to be considerable. However, these costs will decrease once a
greater demand hits the market.158

E. Transparency, Long-Term Incentive Plan, and Security

Shining more light onto corporate decision-making is necessary. We
saw, during the 2008 financial crisis, that those in the position of power
are not the most willing to share their power and the information that they

153. See generally Ken Bertsch, Executive Director, Council of Institutional Inv.,
Remarks Before the SEC Inv’r Advisory Comm. Council of Institutional Inv., (Dec. 8,
2016) (transcript available at [Link]
[[Link]
154. Id. at 4.
155. See Wright & De Filippi, supra note 136, at 4– 5.
156. See Total Cost of Ownership for Blockchain Solutions: Amendment of Fundamental
Cost of Ownership for Private Blockchain Solutions, ERNST & YOUNG 5 (2019), https://
[Link]/Publication/vwLUAssets/ey-total-cost-of-ownership-for-blockchain-solu-
tions/$File/[Link] [[Link]
3XLR-23DC].
157. Id.
158. Currently, there are alternatives, such as Hyperledger or Corda. Hyperledger
fabric is an increasingly popular enterprise blockchain platform. IBM and Amazon
already provide a blockchain platform, which is based on Hyperledger fabric.
Hyperledger Fabric (HVM), AMAZON WEB SERV., INC., [Link]
place/pp/Code-Creator-Hyperledger-Fabric-HVM/B0797GK9YY [[Link]
3H4S-KRWK]; IBM Blockchain in Retail: Building Trust from Source to Consumer, IBM,
[Link] [[Link]
Philipp Sandner, Comparison of Ethereum, Hyperledger Fabric, and Corda, MEDIUM (June
25, 2017), [Link]
hyperledger-fabric-and-corda-21c1bb9442f6 [[Link]
28 Cornell International Law Journal Vol. 53

hold.159 There must be a law or a system that forces them to do so. Trans-
parency was one of the key words during the financial crisis.160 Yet,
despite thousands of new pages of law and regulation, little has been done
to render this word efficient. Therefore, one could argue that, aside from
the law, we need a change in infrastructure. Blockchain could serve as the
example. Increasing transparency in the records of owners, corporate deci-
sions, information-sharing mechanisms, and voting mechanisms could
have additional, remarkable effects on the behavior of the parties involved.
With a technology such as blockchain, ownership— more specifically, man-
agement ownership— could become substantially more transparent. This
would directly affect the transparency of their compensation, given that the
directors’ compensation is often a combination of salary and equity.161
Furthermore, blockchain could support a long-term incentive plan
that provides incentives to both, Boards and shareholders. Those share-
holders who own shares for longer periods of time could be provided with
additional financial, or non-financial, incentives like more voting power,
tokens, or dividends. Blockchain offers not only an infrastructure, but also
self-executing add-ons, such as smart contracts. These could be connected
to the registry of stocks and include the stock options or stock warrants.
Considering the long-term incentive plans, incentive mechanisms could
also be coded into the blockchain where the rights and obligations of spe-
cific shareholders would be subjected to other activities. Incentivizing peo-
ple to actively participate in the life of a corporation would indisputably
contribute to the quality of corporate governance.
In regard to the security of blockchain, “the algorithms that control
the communication [between shareholders] use cryptography to ensure
that only the proper computers are making the decisions, that the
blockchain does not record any improper transactions, and that past trans-
actions are safe from being corrupted.”162 Manipulation, like backdating
the stocks’ purchase or stock compensation, would become impossible
because rewriting the transactions and their corresponding timestamps on
the blockchain is almost impossible.
All of these new tweaks in the system would dramatically affect the
division of power between shareholders and Boards. They would contrib-

159. See, e.g., John C. Coffee, Systemic Risk after Dodd-Frank: Contingent Capital and
the Need for Regulatory Strategies Beyond Oversight, 111 COLUM. L. REV. 795, 795 (2011);
Andrew F. Tuch, Financial Conglomerates and Information Barriers, 39 J. CORP. L. 563,
586– 87 (2014).
160. See Caroline Bradley, Transparency is the New Opacity: Constructing Financial Reg-
ulation After the Crisis, 1 AM. U. BUS. L. REV., 7, 7 (2011) (analyzing the necessary
approach towards the reconstruction of financial regulation in the U.S., while strength-
ening the transparency mechanisms); see also Christine Kaufmann & Rolf H. Weber, The
Role of Transparency in Financial Regulation, 13 J. INT’L ECON. L. 779, 780 (2010).
161. Lucian Bebchuk & Jesse M. Fried, Pay Without Performance: Overview of the
Issues 6 (Harv. John M. Olin Ctr. for L., Econ. & Bus., Working Paper No. 528, 2005).
162. Steve Young, Changing Governance Models by Applying Blockchain Computing,
CATH. U. J.L. & TECH., Spring 2018, at 53, 54. See also Ryan Surujnath, Note, Off the
Chain!: A Guide to Blockchain Derivatives Markets and the Implications on Systemic Risk,
22 FORDHAM J. CORP. & FIN. L. 257, 280– 82 (2017).
2020 Corporations on Blockchain 29

ute to greater transparency, and with the right architecture, they could
change the values on which our corporations are built.

III. Blockchain for Publicly Traded Corporations: A Proposal

Blockchain represents a decentralized architecture that enables auton-
omous software programs to run as a result of the collaborative efforts of
various parties around the world, all while not being controlled by a single
party. By using smart contracts on blockchain, companies or shareholders
can transfer data, documents, or votes thereby facilitating the possibility of
reaching shareholder consensus. Blockchain, as a tool, can be easily trans-
lated into corporate governance and used by shareholders to achieve con-
sensus and engage all relevant parties. If we think of shareholders as
parties who have diverse incentives and are scattered around the world, but
must nevertheless come to a decision— that is, they must achieve consensus
on a number of issues— then, is not blockchain the ideal technology for
corporate governance considering the values and objectives that blockchain
offers? The use of blockchain as a corporate governance tool— for informa-
tion-sharing, shareholder voting, or shareholder incentivizing — is further
supported by the fact that blockchain technology includes transparent and
tamper-resistant registries.163 These registries can be used as registries of
shares as well as registries of shareholder decisions. The form in which
blockchain stores the data is unique and safe, which should support
greater shareholder involvement while safeguarding the corporation’s con-
fidential information. In this section, I will elaborate on the possibility and
practicability of using blockchain by a corporation.

A. What Form of a Blockchain?

When analyzing blockchain, it is important to understand that there
are different forms in which blockchain can be operated and organized.
There are two main types: public and private, which are further organized
into consortium or Hyperledger fabric blockchains.164 The original
blockchains were public (e.g., Bitcoin or Ethereum). A public blockchain is
open to everyone in the world. Anyone can read it, access it, send transac-
tions through it, and expect to see those transactions included in their
account if they are valid.165 In a public blockchain, anyone can also partici-
pate in the consensus process.166 However, this form of blockchain may

163. Distributed Ledger Technology: Beyond Block Chain, U.K. GOV’T OFF. SCI. 1, 23-25
(2016), [Link]
attachment_data/file/492972/[Link] [https://
[Link]/XK86-53QE].
164. See Lafarre & Van der Elst, supra note 141, at 4, 16, 21. For more on
Hyperledger, see VIKRAM DHILLON ET AL., BLOCKCHAIN ENABLED APPLICATIONS: UNDER-
STANDING THE BLOCKCHAIN ECOSYSTEM AND HOW TO MAKE IT WORK FOR YOU 139– 49
(Apress 2017).
165. See, e.g., IMRAN BASHIR, MASTERING BLOCKCHAIN: DISTRIBUTED LEDGER TECHNOL-
OGY, DECENTRALIZATION, AND SMART CONTRACTS EXPLAINED 26– 30 (Packt Publ’g 2d ed.
2018)
166. Id.
30 Cornell International Law Journal Vol. 53

not necessarily be the best for purposes of corporate architecture. “Consor-

tium blockchain is a blockchain where the consensus process is controlled
by a pre-selected set of nodes . . . .”167 We talk about consortium
blockchains if different companies operate a blockchain together while
they are equally involved in the consensus and the decision-making
processes on the chain (e.g., banks).168 Access to the blockchain can vary.
The blockchain may allow everyone or only some to access it, make deci-
sions, or just “read” what is on the blockchain. The consortium
blockchains can be regarded as “partially decentralized.”169 On the other
end of the spectrum, are private blockchains, which are fully controlled by
one organization and access can be limited to chosen participants.170 This
infrastructure can work well for database management, audit, and compa-
nies’ internal infrastructure. Private blockchains are a way of taking advan-
tage of blockchain technology by setting up groups and participants who
can verify transactions internally; however, this means that there is one
party that has full control over the blockchain. Nevertheless, there could
be a combination of a consortium blockchain and a private blockchain,
providing various parties with different sets of rights while ensuring that
the right to add a block would not be centralized in the hands of one entity.
Due to the openness of a blockchain, permission-less, public
blockchains would not be ideal for corporate governance work. A system
where access is controlled would be more suitable, as specific parties—
shareholders, stock exchanges, and governmental agencies— would be
allowed access, but only a limited amount of information would be made
available to the public. This controlled access could be provided by either
a private blockchain, or a consortium blockchain (jointly referred to as
“permissioned blockchains”). In a permissioned blockchain, there is usu-
ally a central authority or consortium that selects the parties who are
allowed to engage on the blockchain, imposing limits on who can access or
record information to the shared databases.171 Permissioned blockchains

167. See, e.g., Vitalik Buterin, On Public and Private Blockchains, ETHEREUM BLOG (Aug.
7, 2015), [Link]
[[Link] [hereinafter On Public and Private Blockchains]; Deborah
Dobson, The 4 Types of Blockchain Networks Explained, INT’L LEGAL TECH. ASS’N. (Feb. 13,
2018, 10:41 AM), [Link]
blockchain-networks-explained?ssopc=1 [[Link] (explaining that
consortium blockchains are sometimes also referred to as federated blockchains).
168. There are numerous examples of consortium blockchains, including those
blockchains that are collaborating together to leverage blockchain technology for
improved business processes, like Quorum, Hyperledger, and R3 Corda. See Darya
Yafimava, What Are Consortium Blockchains, and What Purpose Do They Serve?,
OPENLEDGER (Jan. 15, 2019), [Link]
[[Link]
169. See, e.g., On Public and Private Blockchains, supra note 167.
170. Id.; Dobson, supra note 167.
171. See Allison Berke, How Safe Are Blockchains? It Depends, HARV. BUS. REV. (Mar. 7,
2017), [Link] [https://
[Link]/N4S6-CMNP]. “The right to read the blockchain may be public, or restricted
to the participants, and there are also hybrid routes such as the root hashes of the blocks
being public together with an API that allows members of the public to make a limited
2020 Corporations on Blockchain 31

are usually purpose-driven, which would be consistent with the ideas for
share recordkeeping, information sustenance, and voting. Permissioned
blockchains, besides being limited to a specific group, are also substan-
tially faster than the permission-less ones, which would be yet another
advantage.172 They are also cheaper because only a limited number of
nodes are needed to verify a completed block.173 Since the permissioned
blockchains are operated by a smaller number of pre-selected participants,
they can implement alternative ways to validate and approve transactions
faster.174 Permissioned blockchains also have numerous benefits for “(i)
data privacy,175 (ii) transaction volume scalability, (iii) system responsive-
ness, [and] (iv) ease of protocol updatability. . . .”176
An alternative to the above could be a sidechain blockchain, where
permissioned systems operate independently, but periodically connect
with a public blockchain.177 The point of the pegged sidechains was to
“enable[ ] bitcoins and other ledger assets to be transferred between multi-
ple blockchains,” which would provide the “users with access to new . . .
cryptocurrency systems using the assets they already own.”178 “These sys-
tems . . . [could then] easily interoperate with each other. . . .”179 Even
though the sidechain has been developed for cryptocurrency, its architec-
ture could be used for a stock exchange system. In a stock exchange system,
independent blockchains of publicly traded companies would coexist
while being connected to the same sidechain that ultimately validates data
from other blockchains. This sidechain would be governed by a stock
exchange itself and would be operated as a public blockchain.
There are numerous technical solutions that could apply blockchain
across the multifaceted relationships that are present within a corporation.
This Article does not intend to provide a bulletproof, technical solution,
but rather, offers diverse proposals that should be later developed with the
help of blockchain developers. Nevertheless, while reviewing plausible
technical solutions, the goal is to critically consider the added value of
such systems. Would the fact that the blockchain would be more accurate,
transparent, and immutable be sufficient to pursue this new technology

number of queries and get back” some information. See On Public and Private
Blockchains, supra note 167.
172. See, e.g., On Public and Private Blockchains, supra note 167.
173. Id.
174. Id.
175. The relationship between blockchain and data protection continues to develop.
The analysis is still far from clear. For more information on the topic, see Blockchain and
the General Data Protection Regulation: Can Distributed Ledgers Be Squared with European
Data Protection Law?, EUR. PARLIAMENT (2019), [Link]
RegData/etudes/STUD/2019/634445/EPRS_STU(2019)634445_EN.pdf [https://
[Link]/6GJ7-GGU9].
176. Omar Dib et al., Consortium Blockchains: Overview, Application and Challenges,
11 INT’L J. ADVANCES TELECOMM. 51, 52 (2018).
177. The concept of sidechain blockchain was originally introduced by Core Bitcoin
Developers at Blockstream in their October 2014 White Paper. See generally ADAM BACK
ET AL., ENABLING BLOCKCHAIN INNOVATIONS WITH PEGGED SIDECHAINS (2012).
178. See id. at 1.
179. Id.
32 Cornell International Law Journal Vol. 53

despite many uncertainties? And are these attributes achievable to their

full extent? I would argue yes. Particularly with regards to blockchains of
individual, publicly traded companies, which should reflect on the contem-
porary governance model.
However, one key flaw of permissioned blockchains is a lack of
trust.180 “With permissioned blockchains, there is no guarantee that par-
ties [(blockchain participants)] will not collude to tamper with the underly-
ing blockchain in ways that may ultimately harm other network
participants.”181 “If only a handful of parties can validate and record infor-
mation to a blockchain, these parties . . . [will own the control]. . ., which
could be compromised by technical failures, [fraud,] corruption, or hack-
ing.”182 Still, the technicalities of the permissioned blockchain are not nec-
essarily set in stone. Existing parties, including gatekeepers, will divide
and share powers and liabilities, which can be enforced by implementing
an incentive mechanism into the architecture. Gatekeepers have always
played a “valuable role in capital markets as a mechanism for investor pro-
tection,” and blockchain technology should enhance their efficiency.183 In
the following sections, I focus on the role of four key parties: a governmen-
tal (or enforcement) agency, a stock exchange, a corporation, and the
shareholders. The division of rights is a balancing act that needs to be
carefully considered.

B. Governmental Agency: A Developer and an Observer at the Same

Time?
If blockchains attain a central role in corporate recordkeeping and sale
of shares, as well as become a network for information disclosure, the
maintenance and upgrading of blockchains themselves would have to be
closely supervised, if not carried out directly by a governmental (enforce-
ment) agency such as the SEC in the case of the U.S. One could imagine
the entire corporate infrastructure system being “put” on a blockchain, or
rather, on a group of various types of blockchains. Since blockchains are
inherently decentralized systems, which consist of different actors who act
depending on their incentives and on the information that is available to
them, the codes and smart contracts, similar to the laws and rules, would
be developed with the help of enforcement agencies. The SEC in the U.S.
has already initiated talks about blockchain and the possibility of com-
pletely reconstructing the equity markets with distributed ledger technol-
ogy involving certain layers of blockchain.184

180. DE FILIPPI & WRIGHT, supra note 38, at 32.

181. Id.
182. Id.
183. On the role of Gatekeepers, see Jennifer Payne, The Role of Gatekeepers, in THE
OXFORD HANDBOOK OF FINANCIAL REGULATION 254, 255 (Niamh Moloney et al. eds.,
Oxford Univ. Press 2015).
184. Amanda Maine, SEC Advisory Committee Members Endorse Universal Proxy,
Encourage Blockchain in Corporate Elections, JIM HAMILTON BLOG (Sept. 18, 2018, 8:44
AM), [Link]
[Link] [[Link] Several roundtables of stakeholders
2020 Corporations on Blockchain 33

One of the solutions could be a private (permissioned), or a semi-pri-

vate, blockchain run by a central authority in collaboration with other gate-
keepers— namely, the stock exchange— which would manage the
blockchain’s protocols, having full control over access to the blockchain
and the rules governing the relationships. The agency would secure access
to the blockchain to those shareholders who prove their ownership. Some
of the governance tasks would be carried out by the stock exchange and
some by the governmental agency itself. Yet, all the activities would be
fully visible and transparent to everyone on the blockchain. With the
removal of certain parties (e.g., brokers, or transfer agents), the SEC could
expand its budget and require fees for maintaining the infrastructure, and
thus support its activities and the quality of the oversight. A governmental
agency would need to closely collaborate with software engineers, develop-
ers, and lawyers who would help translate law into code.

C. A New Role for Stock Exchanges?

Presently, governmental agencies share oversight and governance of

markets with a number of gatekeepers, including the stock exchanges. As
such, stock exchanges play two roles: (i) the role of a publicly traded com-
pany in competition with other publicly traded companies, and (ii) the role
a Self-Regulatory Organization (SRO) that brings together various market
participants.185 They are thus responsible for regulating themselves and
all the parties that carry out business with them. Therefore, in the case of a
change of corporate and market architecture, they will continue to have an
important role in governance and oversight.
Stock exchanges have already recognized the changing horizon and
started to look and review their processes, taking into consideration the
implementation of blockchain. The Australian Securities Exchange (ASX)
is rebuilding its Clearing House Electronic Subregister System (or CHESS)
with help from a distributed ledger start-up known as Digital Asset.186
Similarly, “the Hong Kong Exchange and Clearing (HKEX) is working with
Digital Asset and BNP Paribas to enhance its post-trade infrastruc-

discussed the possibility of using blockchain for proxy voting systems (Bank Santander
has already initiated a pilot program). See Sujha Sundararajan, Santander Conducts
Proxy Voting Blockchain Pilot at AGM, COINDESK (May 18, 2018, 2:02 PM), https://
[Link]/santander-conducts-proxy-voting-blockchain-pilot-at-agm [https://
[Link]/C5TA-J7AV].
185. On the role of stock exchanges, see generally Roberta S. Karmel, Demutualiza-
tion of Exchanges as a Strategy for Capital Market Regulatory Reform, in FOCUS ON CAPI-
TAL: NEW APPROACHES TO DEVELOPING LATIN AMERICAN CAPITAL MARKETS 269 (Kenroy
Dowers & Pietro Masci eds., 2003); Andreas M. Fleckner, Stock Exchanges at the Cross-
roads, 74 FORDHAM L. REV. 2541 (2006); Paul G. Mahoney, The Exchange as Regulator, 83
VA. L. REV. 1453 (1997).
186. See CHESS Replacement: ASX Is Replacing CHESS with Distributed Ledger Technol-
ogy (DLT) Developed by Digital Asset, ASX, [Link]
[Link] [[Link]
34 Cornell International Law Journal Vol. 53

ture. . . .”187 Numerous other stock exchanges are starting to move toward
this direction, including Singapore and Gibraltar.188 The London Stock
Exchange Group (LSEG) joined forces with International Business
Machines (IBM) in 2017 “to build a blockchain-based platform to digitally
issue shares of small and medium size enterprises in Italy.”189 The project
was tested by Borsa Italiana, which is a member of LSEG.190 The main
rationale for the blockchain-based platform was to allow SMEs to have a
better and easier interaction with their shareholders and to provide greater
transparency to investors on their ownership.191 Additional benefits for
the corporations to join the platform have been recently introduced by the
Italian government with new tax incentives.192
At the beginning of 2016, Nasdaq announced that it would develop a
blockchain-based e-voting service— to allow shareholders of companies
listed on Nasdaq’s Tallinn Stock Exchange to vote in shareholder meet-
ings— as one of the pilot programs.193 By early 2017, Nasdaq declared the
pilot a success and stated that it created a “proof of concept [ ] with four

187. Stock Exchanges in Asia Pacific Are Rising to the Challenge of Blockchain Adoption,
BNP PARIBAS (July 22, 2019), [Link]
[Link] [[Link] [hereinafter BNP PARIBAS].
188. Id.; The Gibraltar Stock Exchange Set to Offer Digital Debt Securities and Funds,
GIB. STOCK EXCHANGE (Apr. 9, 2019), [Link]
stock-exchange-set-to-offer-digital-debt-securities-and-funds [[Link]
D4BY] [hereinafter GIB. STOCK EXCHANGE] (announcing that the Gibraltar Stock
Exchange (GSX) launched listings of blockchain-powered securities on its GSX Global
Market on April 9, 2019).
189. See Applications for Blockchain, PRINCIPLES RESPONSIBLE INV. (Aug. 31, 2018),
[Link]
tions-for-blockchain/[Link] [[Link] [hereinafter Applica-
tions for Blockchain]. See also LSEG Links with IBM to Build Key Blockchain Solution for
SME’s, LONDON STOCK EXCHANGE GRP. (July 18, 2017), [Link]
resources/media-centre/news-and-insight/lseg-links-ibm-build-key-blockchain-solution-
smes [[Link] [hereinafter LONDON STOCK EXCHANGE GRP.].
190. Applications for Blockchain, supra note 189.
191. Raffaele Jerusalmi, the CEO of Borsa Italiana stated: “Through our work with
IBM on this blockchain solution, Borsa Italiania is taking the lead in transforming the
way European SMEs can manage their shareholder data and at the same time expand
credit access— all on a trusted digital platform.” LONDON STOCK EXCHANGE GRP., supra
note 189.
192. At the end of 2018, the Italian Parliament passed “the Budget Law for 2019, . . .
which includes several provisions for digital growth.” It binds the government to set up a
fund of 45 million Euros for 2019– 2021, with the aim of supporting companies that are
developing blockchain, AI, and IOT solutions, relevant to Italy’s competitiveness. See
Francesco Bonichi & Elisa Cesetti, Insight: Italy– New Tax Incentives for Digitalization
and Innovation, BLOOMBERG TAX (Mar. 21, 2019, 5:59 AM), https://
[Link]/daily-tax-report-international/insight-italy-new-tax-incentives-
for-digitalization-and-innovation [[Link]
193. See Press Release, Nat’l Ass’n of Sec. Dealers Automated Quotations, Nasdaq’s
Blockchain Technology to Transform the Republic of Estonia’s E-Residency Shareholder Par-
ticipation (Feb. 12, 2016) (available at [Link]
details/nasdaqs-blockchain-technology-transform-republic-estonias-e [[Link]
J3XT-S3AH]).
2020 Corporations on Blockchain 35

web-based user interfaces in Estonia.”194 They have also tested the solu-
tion with a Nasdaq Tallinn company LHV Group.195 Although this all
sounds extremely positive, there have been no news about this pilot, and its
efficiency or effectiveness, since 2017.196 On the contrary, according to a
source who is familiar with Nasdaq, “the cost to fully adopt [blockchain
technology] outweighed the benefits.”197 Supporting this view, large com-
panies that have initiated thirty-three projects involving blockchain agree
that “the technology has yet to deliver on its promise.”198 Yet, despite the
challenge of limiting the cost of blockchain, the companies have not lost
their faith. Facebook recently announced its new blockchain-based
cryptocurrency, Libra, which will undoubtedly bring a lot more discussion
and focus on blockchain.199

D. Corporations as the Trust-Holders: Risks & Incentives

If blockchains become the tool for corporate governance, the operation
and maintenance of blockchain would raise additional governance, regula-
tory, and liability concerns. If a governmental agency is responsible for the
operations, then the incentives to manipulate the code could be limited.
However, one could argue that only corporations should have that author-
ity because they know their governance rules best and should be enabled
to react quickly in case of technical issues; therefore, they should be the
ones authorized to update their code. But this would mean that the corpo-
ration— that is, the Board— will have the keys to the treasure, which would
undermine some of the benefits of blockchain like transparency and trust.
Corporations themselves should only be entitled to a specific set of
rights, which would still be overseen by third parties as is the case now. A
blockchain corporate platform could give reading and writing privileges to
the corporations in regard to their disclosure obligations. However, share-
holder recordkeeping and voting management should be left to third par-
ties. By publishing ownership records to the blockchain, it would enable

194. See Is Blockchain the Answer to E-Voting? Nasdaq Believes So, NASDAQ (Jan. 23,
2017, 8:00 AM), [Link]
[Link] [[Link]
195. See Nasdaq Calls Shareholder E-voting Tests Based on Blockchain Technology a Suc-
cess, BALTIC COURSE (Jan. 23, 2017), [Link]
ness/?doc=127087&output=D [[Link]
196. The only published news has been a new collaboration between Nasdaq and
South Africa’s Central Securities Depository at the end of 2017. Their collaboration was
to focus on “a new blockchain solution that would bring electronic voting to the South
African capital markets,” using the model from Estonia. See Press Release, Nat’l Ass’n of
Sec. Dealers Automated Quotations, Nasdaq to Deliver Blockchain E-Voting Solution to
Strate, (Nov. 22, 2017) (available at [Link]
releases/1648022/nasdaq-to-deliver-blockchain-e-voting-solution-to-strate [https://
[Link]/MVL4-35GL]).
197. See Anna Irrera & John McCrank, Focus: Wall Street Finds Blockchain Hard to
Tame After Early Euphoria, REUTERS (July 16, 2019, 6:07 AM), [Link]
article/us-blockchain-finance-focus/wall-street-finds-blockchain-hard-to-tame-after-early-
euphoria-idUSKCN1UB0YV [[Link]
198. Id.
199. See generally LIBRA ASSOCIATION MEMBERS, WHITE PAPER (2019).
36 Cornell International Law Journal Vol. 53

the timely and accurate determination of vote entitlement. During voting

and general meetings, blockchain’s transparent nature would facilitate
instantaneous vote tabulations. This efficiency will provide shareholders
with finality and also increase the legitimacy of the election.200

E. Shareholders: Miners or Readers?

There are a few entities that already operate on a blockchain, where

shareholders have a greater role in the everyday decision-making and oper-
ations.201 These shareholders are “tak[ing] a greater role in the manage-
ment of their organizations, with innovations such as real time accounting,
nearly instantaneous voting mechanism, and more efficient markets.”202
However, this will not be the modus operandi for the majority of publicly
traded companies, as most shareholders might not necessarily be involved
to such a great extent.
The key questions in regard to the shareholders are: what should their
role on the blockchain be? To what extent should they be actively involved
in mining the corporate blockchain, if at all? If all shareholders are able to
mine, that might negatively affect the speed or even security of the
blockchain, yet it would provide the blockchain with a higher level of trust.
Alternatively, there could be a mechanism where only shareholders who (i)
have a specific percentage of ownership,203 or (ii) are regularly active
would be provided with mining opportunities, within which they could
also be incentivized with tokens. Other shareholders would only be pro-
vided with some kind of “reading” rights, where they can see what is hap-
pening on the blockchain but cannot mine.
In order to guarantee the security of a blockchain and create incentive
mechanisms, a combination of proof-of-work and proof-of-stake algorithms
could be applied. The proof-of-stake would keep the blockchain safe and
the proof-of-work would enable the reward (or token) associated with com-
pleting a new block.204 Peercoin was “the first alt-coin to use a hybrid
Proof-of-Work and Proof-of-Stake algorithm to issue a new currency.”205
Tokens could represent an additional feature of the blockchain. These
tokens could encapsulate an incentive mechanism where the number of

200. Lafarre & Van der Elst, supra note 141, at 16.
201. See, e.g., CONSENSYS, [Link] [[Link]
LQFG] (last visited May 26, 2020) (describing how ConsenSys gives shareholders a
more powerful position, which enables business models to be built on blockchain).
202. See Wright & De Filippi, supra note 136, at 36.
203. The percentage could correlate with the existing regulation on minority share-
holders, which varies between jurisdictions from 3% to 25%. Minority shareholders are
usually provided with a greater set of rights in order to protect their position. OECD
Corporate Governance Factbook, OECD 80 tbl.3.2 (June 8, 2019), [Link]
corporate/[Link] [[Link]
204. Sunny King & Scott Nadal, PPCoin: Peer-to-Peer Crypto-Currency with Proof-of-
Stake, PEERCOIN (Aug. 19, 2012), [Link] [https://
[Link]/QJ29-7S23].
205. ANDREAS M. ANTONOPOULOS, MASTERING BITCOIN: UNLOCKING DIGITAL CRYPTO-CUR-
RENCIES 226 (Mike Loukides & Allyson MacDonald eds., O’Reilly Media 2014).
2020 Corporations on Blockchain 37

uses would enhance voting power or would increase the dividend. The
code within the token could also have various features.
The blockchain platform should, at minimum, provide shareholders
with reading privileges that would allow them to access corporate docu-
ments, observe the activities on the blockchain, store copies of the
blockchain, and thereby help secure the system. It should also allow them
to trace their past voting instructions and votes, as well as provide them
with secure tools to communicate.
Corporations have, for a long time, relied on the separation of owner-
ship and control, where Boards often govern a company with only very
limited oversight from shareholders. Through the deployment of new and
innovative blockchain technology, shareholders may take on a greater role
in the management of their organizations, as discussed in Part II of this
Article. In a world of decentralized, autonomous consensus, collective
decision-making could take greater prominence, resulting in increased cor-
porate governance and democratization of corporate power. Blockchain
computing changes how consensus can be reached and will, therefore,
change how any organization that applies blockchain technology serves its
members.206

F. Additional Flaws
The inherent risks and flaws connected to blockchain will vary
depending on the type of blockchain a corporation aims to implement. For
instance, in the case of a public blockchain, there is a possibility of a “51%
Attack.”207 But this is not really a concern in the case of private, consor-
tium, or modified blockchains because the nodes’ power is more limited
than it would be in a public blockchain. Shareholder wallets are another
concern that would need to be addressed. It must be determined who will
be in control of the shareholders’ wallets— that is, who is the trusted party?
Is it a government or governmental agency that is responsible for keeping
the identification information safe? Most presumably, yes. Furthermore,
there would need to be processes in place in the event that a blockchain
wallet is lost.
Another major concern that has already been mentioned is the cost of
a blockchain, which ultimately will be borne by all the shareholders. An
additional substantial flaw is the energy consumption. The digital con-
sumption index continues to increase with the complexity of generating
new blocks.208 This is a concern not only because of the energy efficiency

206. Chris Hammerschmidt, Consensus in Blockchain Systems. In Short., MEDIUM (Jan.

27, 2017), [Link]
short-691fc7d1fefe [[Link] (explaining how a consensus is
reached in blockchain).
207. See discussion supra Section I.E.4. For more on blockchain security attacks, see
JOSEPH HOLBROOK, ARCHITECTING ENTERPRISE BLOCKCHAIN SOLUTIONS 335– 36 (John Wiley
& Sons 2020).
208. Currently, according to Digiconomist, Bitcoin’s energy footprint per transaction
is 541.29 kWh. To better visualize the consumption of energy in the case of Bitcoin,
541.29 kWh is equivalent to the power consumption of an average U.S. household for
38 Cornell International Law Journal Vol. 53

of corporations, but also in light of climate change, the need to limit carbon
dioxide emissions, and electricity consumption at large.209 Further con-
cerns are connected to privacy. With a public or a semipublic blockchain,
all transactions are visible.210 Even with a permissioned blockchain, a
shareholder owning only one share would have access to all of the informa-
tion.211 This might prove problematic and not truly efficient. Based on
any economic theory, it is hard to assess to what extent this transparency is
positive and to what extent it raises new economic behavior concerns.
These substantial limitations could potentially present too great of a
risk to even undertake blockchain as a tool for corporate governance. Yet,
the existing forms of blockchain continue to develop with new variations,
which can “offer differing degrees of control and decentralization across a
spectrum of options.”212

Conclusion
Blockchain is a very promising technology, yet it is still emerging and
thus immature in comparison to other technologies. It has a number of
weaknesses, out of which its costs and electric consumption should be con-
sidered the most relevant. However, this situation, over the next years, can
substantially change and a different mechanism of “proof” could be devel-
oped. The World Economic Forum predicts that by 2027, 10% of the
world’s gross domestic product will be stored on some form of blockchain
technology.213 Whether this is true or not, and whether blockchain repre-
sents a truly time-changing solution or just a fad that in a couple of years
will evaporate, is the crucial question that corporations need to address.
Nevertheless, according to TechCrunch, at least $1.3 billion was invested
globally in 2018 into blockchain-developing companies.214
Many countries have already started to adopt changes to their regula-

over 18.29 days. Bitcoin Energy Consumption Index, DIGICONOMIST (2020), [Link]
[Link]/bitcoin-energy-consumption [[Link]
209. That being said, there are several operations that use alternative or renewable
energy. In Iceland, its biggest Bitcoin operation is run on the renewable geothermal
energy and arctic air cooling. See Nathaniel Popper, Into the Bitcoin Mines, N.Y. TIMES:
DEALBOOK BLOG (Dec. 21, 2013, 1:42 PM), [Link]
into-the-bitcoin-mines/ [[Link]
210. See Sarah Meiklejohn, The Limits of Anonymity in Bitcoin, in ROUTLEDGE HAND-
BOOK OF CRIME SCIENCE 280, 280– 81 (Richard Wortley et al. eds., Routledge 2018).
211. Permissioned, public blockchains “are a form of hybrid system that provide for
situations where whitelisted access is required but all the transactions should be pub-
licly viewable.” See CATHERINE MULLIGAN ET AL., BLOCKCHAIN BEYOND THE HYPE: A PRACTI-
CAL FRAMEWORK FOR BUSINESS LEADERS 5 (2018).
212. Alexander Daniels, Blockchain & Shareholder Voting: A Hard Fork for 21st-Cen-
tury Corporate Governance, U. PA. J. BUS. L. 405, 431 (2018).
213. Deep Shift: Technology Tipping Points and Societal Impact, WORLD ECON. F. 1, 24
(2015), [Link]
report_2015.pdf [[Link]
214. Jason Rowley, With at Least $1.3 Billion Invested Globally in 2018, VC Funding for
Blockchain Blows Past 2017 Totals, TECHCRUNCH (May 20, 2018, 2:11 PM), [Link]
[Link]/2018/05/20/with-at-least-1-3-billion-invested-globally-in-2018-vc-funding-
for-blockchain-blows-past-2017-totals/ [[Link]
2020 Corporations on Blockchain 39

tory framework in order to support blockchain.215 The global distribution

of blockchain development activity encourages jurisdictional competition
among regions. U.S. dominance of the early Internet industry produced
major benefits, both economic and in terms of global soft power. Hoping
to be the Silicon Valley of the crypto economy, countries ranging from tiny
Gibraltar to giant Russia are creating new legal frameworks to attract
blockchain start-ups, coin offerings, and other activities.216 The early
leader is the canton of Zug in Switzerland, which relies on a stable govern-
ment, a central location in Europe, a welcoming environment for cryptocur-
rency companies, and very favorable tax policies.217 Since 2016, it has
been using blockchain technology to pay cantonal taxes.218 There is no
certainty that the U.S., or any other jurisdiction, will strike the appropriate
balance between flexibility and protection in its regulatory approaches to
blockchain-based systems. The debates over this technology have just
begun. Overall, though, regulators who do nothing will be a greater threat
to the development of the market than those who engage in thoughtful and
evolving efforts to address public policy considerations.
Aside of all predictions, technology should not only be about the tech-
nology itself, but also about the purpose it serves. Therefore, the main
concern for regulators and lawyers should be the added value of
blockchain and whether this technology can further the policy goals of cor-
porate governance, provide transparent overview of ownership, support
easier access to information, provide more shareholders with the opportu-
nity to vote and to be active owners, and support the ideas on which our
markets have been built and which we have struggled to enforce.
As the technology matures and continues to be accepted by more juris-
dictions, blockchain could accelerate a structural shift of power. As Profes-
sor Kevin Werbach has emphasized, blockchains “operate as mechanisms
of law and governance.”219 Code-based rules and protocols governed by a
blockchain-based network would provide greater transparency and effi-
ciency. Code-based protocols and decisions related to their development
would ultimately dictate how these systems work and shape our means of

215. The year 2019 substantially changed the regulatory scene. New regulations, or
draft regulations, have been adopted in several jurisdictions across the world, including
Switzerland, Liechtenstein, Malta, France, the U.K., Japan, Hong Kong, and several states
of the U.S. See, e.g., Blockchain Laws and Regulations 2020, GLI (Oct. 23, 2019), https://
[Link]/practice-areas/blockchain-laws-and-regulations [https://
[Link]/6J3L-VWS6].
216. See BNP PARIBAS, supra note 187; GIB. STOCK EXCHANGE, supra note 188. Cf. Kevin
Helms, Russian Official: Cryptocurrency Bill Completed— Effects on Payments, Exchanges,
Miners, BITCOIN NEWS (Apr. 3, 2020), [Link]
[[Link]
217. Dean Steinbeck, Zug: The Crypto-Friendly Jurisdiction Where You Can Pay Taxes
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218. Id.
219. KEVIN WERBACH, THE BLOCKCHAIN AND THE NEW ARCHITECTURE OF TRUST 10
(2018).
40 Cornell International Law Journal Vol. 53

interaction, whether that be transfer of files, money, knowledge, or (possi-

bly) votes.
Corporate governance could change in many ways through blockchain
technology. Shareholders, institutional investors, and activist shareholders
could benefit from being able to access shareholders’ records, share infor-
mation, and vote. Yet, I am slightly doubtful about whether there will be
sufficient support for this change, and whether the Boards would have any
incentive to bring more clarity and transparency to a system that is hard to
understand for outsiders and regular shareholders. Information asymme-
try, rational ignorance, and the overall sentiment on the value of the share-
holder vote might support the existing system, where the power remains in
the hands of few— namely, Boards and institutional investors. To change
the existing structures, there would have to be a substantial push from
shareholders, a scandal, or another financial crisis. If I was to be more
optimistic, then I would conclude that the market will first decide whether
blockchain innovations prove cost-effective and efficient, and only then
would blockchains become the technological foundation of modern
corporations.