Nigel Payne, Strate Chairman, in conversation with Gregory Naicker, Head of CSD Services, about how Strate’s e-Voting platform performed during Strate’s recent AGM.

The Strate e-voting system ensures that meeting resolutions are not questioned later and the issuer’s ethical integrity is upheld

Efforts to contain the Covid-19 pandemic have driven businesses online more rapidly than expected, but not everyone has been ready for the overnight shift to the digital world. We have seen companies delay their annual shareholders meetings and results announcements while they consider how to conduct them online.

AGMs serve a critical role as they provide one of the few opportunities for shareholders to engage with the company’s directors, raise questions and issues that concern them and vote on matters affecting the business.

The adoption of digital solutions for shareholder meetings is long overdue. SA’s financial markets industry has been grappling with the problem of a fragmented, paper-based environment for shareholder meetings for more than three decades. Most shareholders in SA companies do not attend AGMs but submit a written proxy in advance authorising the chair, or another representative, to vote according to their specified wishes. This is done either via e-mail, hand-delivery to the company, or even by post.

This manual administration has resulted in a lack of voting transparency, increased risk of human error and barriers to communication between companies and their shareholders. The Companies Act allows for companies to convene and hold shareholder meetings electronically, provided this is not prohibited in the issuer’s memorandum of incorporation.

Some SA companies have started to broadcast their shareholder meetings via webcasts, which allows virtual attendees to ask questions, but it does not allow them to cast their votes in real time. Shareholders still have to submit their votes prior to the meeting without the opportunity to make real-time amendments after engaging with directors about their concerns.

Central securities depository Strate serves the financial market through the safekeeping of the legal, digital record of securities ownership. At the heart of what we do is the safeguarding of ownership rights across security types — from equities, to bonds, money markets and participatory notes in collective investment schemes — for public and private markets.  

As the custodian of this register, Strate has worked with SA’s financial market participants and leading global technology provider Nasdaq to co-develop an innovative, groundbreaking technical solution to enable virtual shareholder meetings. The e-voting platform allows investors  to communicate directly with companies and provide a fully digitised experience that seamlessly connects issuers and investors.

The distinct advantage of the e‐voting platform is that it caters for the changing world of work by ensuring that shareholders can participate in a meeting, vote in real time, and change their votes at any time before the meeting closes, from anywhere in the world. This radical change in the way shareholders vote at company meetings allows for greater shareholder participation, voting transparency and efficiency. It also saves time and reduces costs as attendees don’t have to incur travel expenses, especially when it comes to attending meetings in other cities or even overseas.

In a first-of-its-kind in terms of the technical solution and design, the e-Voting platform caters for nominee structures, which means voting control is in the hands of the beneficial owners of shares, who are the ultimate owners of the company, and not the intermediaries. Traditionally, shareholder votes go through a multilevel process via various intermediaries, before reaching the issuer. This takes time, increases the risk of human error, and does not give investors a direct communication line to the company they are invested in.

The e-voting platform alerts shareholders about company meetings so they can register to participate and cast their votes. Shareholders can see their vote has been cast, change their votes in real-time and direct virtual questions to the chairperson during the meeting. The chair is able to view individual shareholder votes — rather than the aggregated vote of financial institutions — making the voice of the shareholder truly heard. The platform provides auditable results immediately after the meeting has closed.

By connecting to Strate, issuers get a virtual voting solution from the source of the digital securities ownership register, while service providers who facilitate company meetings can easily integrate into our platform to provide a fully digitised front of house solution for their clients.

By providing full transparency to shareholders, Strate e-voting helps build stronger investor relations between issuers and shareholders. The real-time nature of the system, built on a binding ledger, provides auditable, tracked  results for each shareholder. It ensures that meeting resolutions are not questioned later and the issuer’s ethical integrity is upheld. This in turn helps to uphold the integrity of the overall financial market ecosystem.

Strate e‐voting uses global technology provider Nasdaq’s blockchain technology to provide voting records, real‐time access to voting results, accurate records of cast votes and the full chain of proxies. The underlying blockchain technology ensures the integrity and security of the data, as votes are recorded in a tamper-proof ledger, reducing risk. It takes less time to arrange and conduct AGMs, while the legal right of the voting outcome is upheld.

Strate was the first company to hold its AGM virtually using the e-voting solution in mid-May. The results were submitted to the chair to audit as the meeting closed, as is typical with unlisted companies. For listed companies, Strate’s solution requires no human intervention whatsoever. Auditing is undertaken by externally appointed auditors using the immutable ledger to underpin accuracy and security.

Strate and the SA financial market have together created a secure, efficient solution that will forever change shareholder voting.

• Naicker is head of CSD services at central securities depository Strate.

Strate hosted its first remote Annual General Meeting, powered by DLT and Nasdaq. Strate’s e-Voting, which was built in collaboration with the South African financial market and uses world-class DLT and Nasdaq technology is a system that provides fully virtual end-to-end voting, seamlessly connecting shareholders and companies

Strate CEO André Nortjé and Beverley Furman, Head of Operations and Change talk about their recent joint partnership with Nasdaq Tech and collaborating with the South African financial market ecosystem that led to the creation of a revolutionary new electronic voting platform for issuers and shareholders.

Q: Can you tell us a bit about your organization and how you work with technology innovation?

André Nortjé: Strate is one of South Africa’s central securities depositories; the way in which we view innovation is not limited to technology, but considers the innovation value chain, which is a combination of how we deliberate about business models, operating models, and market-adoption models. Strate as a central securities depository is entrusted to keep the electronic records of ownership and settle trades and, as such, we need to connect the ecosystem. When we innovate, we look at the value chain from an end-to-end perspective to identify problems that we can solve either using technology, a business model or an operating model.

Q: You are one of the first major organizations to use this type of blockchain-based e-Voting solution. How did you arrive at the decision to implement this?

André Nortjé: We decided to use blockchain technology to solve the problem of voting in South Africa. Blockchain as a concept is quite difficult to implement in a complicated ecosystems. The e-Voting solution was necessary to solve the problem where the market had a fragmented paper-based environment. The solution was a fairly low-risk implementation therefore we decided to use blockchain technology that was aligned to what we have being trying to achieve, which was a single digital solution for the voting activity. We found a partner like Nasdaq to join us in co-developing what we believe is a world-class solution for electronic voting.

Q: What benefits does this bring for the shareholders in South Africa and how has the new service been received by the issuer community in terms of corporate governance and investor transparency?

Beverley Furman: In moving to electronic voting, and using the application that we’ve co-developed with Nasdaq, there has been the enablement of two main benefits, or themes. One is simplicity and efficiency. The other one is shareholder activism and the voice of the shareholder being heard by the issuer right up until the close of resolutions. Asset managers who have been exposed to the demo of this solution have shown huge excitement because this application allows them to cast their votes and fulfil their fiduciary duties and their corporate and social responsibility. They can cast their votes on the application either for or against or abstaining, and they are representing their clients who are the ultimate beneficial owners of the investments. The solution also allows them to insert commentary. So, for the first time, if they are abstaining from a vote or voting against, they can include commentary and the issuer can take note of why an asset manager is voting in a certain way. That is proving to be of significant value in the asset managers getting their voice heard by the companies that they’re investing in.

Q: Lessons learned that you would like to share with others that are looking to implement a similar solution?

André Nortjé: Change is always difficult, especially if you have to change the ecosystem and the change that is needed from voters, a transfer agency and custodians. The important lesson that we’ve learned through the process is to think carefully about the value proposition to each of the various participants in the value chain of e-voting. Your product should be priced in a way that supports the value that is created for each of the participants. Another big lesson we have learned is that you need to involve the market in the conversations about the change. I think that’s been the success story for us in South Africa, that this solution was co-developed with our technology partner, Nasdaq, as well as the market.

Strate introduces an alternative digital access point for the reporting and matching of unlisted bond transactions to facilitate the trade reporting of call bonds. The new platform offers reduced risk, increased efficiency and an automated coupon and redemption process