Abstract
This article presents a survey of recent studies on the impact of digitalisation, and particularly blockchain technology, oncorporate governance and the principal-agent conflict in companies. The principal-agent conflict has been a centerpieceof the corporate governance research for more than 40 years. However, recent technological developments, andblockchain in particular, has created new avenues for exploration.We survey the implications of blockchain for the principal-agent conflict in three parts: 1) the organisationalenvironment, and the creation of the conflict; 2) common observable instances of conflict; 3) actions necessary tomaximise the value of blockchain implementation. We limit the studied conflict to the relationship between shareholdersand management. We also limit the blockchain use cases to those currently in testing. The applications for blockchain insecurities trading and for corporate functions automation via ‘smart’ contracts are both analysed. We also evaluate theimplications for investor activism.Our results indicate that passive investor behaviour is at the core of the environment that creates conflict. One of thekey drivers of low activity is a non-transparent voting process resulting in low participation rates. Studies indicate thatblockchain can solve this issue, thus mitigating the conflict, and is an attractive proposition for board members. Themost frequent instances of conflict are related to the composition of boards of directors and compensation schemesobserved at shareholder voting. Using blockchain for settlement would eliminate ambiguity in shareholder registersand prevent such strategies as “empty voting”. Smart contracts promise automation of governance functions like audit,which also weakens conflict. Even skeptics agree that voting is a promising application for blockchain. However, thereis evidence that blockchain poses its own problems, and that smart contracts are associated with practical risks. Somecritics argue that blockchain is less efficient than conventional corporate procedures.Blockchain is among the top digital technologies that business leaders have to monitor closely. As such, this overview ofthe most up-to-date thinking on the subject is relevant for anyone interested in the future of corporate governance andthe digitalisation of business processes. This evaluation serves to highlight the current status of this innovative resource,outlining for both professionals and newcomers what exactly blockchain’s potential uses and implications are, while alsooutlining where a lack of quantitative research creates opportunities for further contributions to the research field. Thisstudy will also be instructive for those investigating blockchain implementation and the optimal characteristics of thesolution.
Highlights
The rest of this article is structured as follows: we briefly review the blockchain technology and its application;we review the literature according to the three categories of impact of blockchain on corporate governance mentioned above, andwe provide conclusions and identify the most promising areas for future research
We surveyed the recent studies on the implications of blockchain for corporate governance
We focused on three corporate governance aspects affected by the blockchain application: 1) the organisational environment, and the creation of the conflict; 2) common observable instances of conflict; and 3) actions necessary to maximise the value of blockchain implementation
Summary
Yermak [9] argues that if instead of traditional corporate structures the firm ownership was based on the blockchain, this would create an environment where the shareholders would be automatically included in the decision making process, not just at the annual voting This would drastically increase the governance activity by the shareholders. Our review shows a lack of quantitative proof of the positive influence of blockchain on corporate governance, one thing is certain: to embrace the potential benefits, firms need to choose the optimal way to implement blockchain and develop a set of competencies that enable them to benefit while mitigating the risks While these topics are normally a subject of computer science or managerial literature, we still believe it is important to briefly address this in the final section of this article. Are they different from other IT projects? What is an optimal way to govern a blockchain? Should there be a special board of directors committee, or a special unit in the organisation or a blockchain subsidiary? What is an optimal way to staff a blockchain implementation project? Should an industry professional be hired as a board member or a member of top-management, or should a startup be bought with an established team? These questions leave ample room for further research on this topic, and demonstrate further how the field is still in a nascent stage
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