The New Company Governance Model in the Security Tokens Era
These days, we’re seeing a big push to further engage investors or token-holders in the projects they become involved in. Maintaining an active and interested community is essential. However, many companies lack structure and transparency when it comes to involving their token-holders.
What we can’t see is a factual change in the way cryptocurrency companies view their token-holders. It’s pretty clear that token-holders are de facto considered a customer base.
This type of engagement is obviously correct in the case of a true utility token being involved in a project, however, the tokens being traded on exchanges of which holders expect to increase in value (e.g. an investment vehicle) are clearly not only a utility. For this reason, we think the token-holders should be considered a shareholder instead of a client. Moreover, in some projects the token-holders are supposed to receive a certain amount of reward for holding the token; exactly like the dividends shared by any “old economy” company.
The Solution: Actively Involve Token-Holders in the Governance of the Company
The solution to the above problem is to declare the token as a security, with all the regulation and law implication that comes with it, as well as finding a way to involve the token-holders in the real governance of the company.
In the same way that shareholders who buy a share in Facebook, Boeing or any other listed or non-listed company, token-holders should have the right to vote in order to have an actual impact on business actions, decisions and as final result, profitability.
Another important property is the distribution of dividends to token-holders; this aspect becomes more and more important for security tokens because it incentivises the owner to hold a token as a long-term investment, rather than just for the increase in valuation that, in a mature market, will follow the real economic achievements of the issuing company.
All of this, as an ultimate goal, will make the price of token a much better representation of the real value of the company and its capability to produce profits.
A New Governance Entity for the Token-Holders
In order to reach the goal of involving token-holders in a transparent and credible way, a new governance entity has to be officially defined and integrated in the decision-making process.
We at BizShake will create such a governance entity that will be called “Token-Holders Steering Committee” (THSC).
The THSC will fundamentally have two functions: take the business decisions escalated to them by the Board of Directors (BoD) as well as, once a year, electing one representative that will be a BoD member. The token-holders will also be entitled to receive 30% of the dividends deliberated by the BoD.
All the decisions made by the THSC will be regulated by a Smart Contract on the Blockchain that will register each and every token-holder’s vote. This Smart Contract will allow for the decision-making process to be transparent at any stage to review all the votes using the Digital Identity as the certification of authenticity for the vote casted.
This new governance model will effectively integrate token holders into the decision-making process of the company and will grant transparency of how the business is conducted. The transparency will also be further increased by the presence of a member of Board of Directors elected among the token holders and by themselves.
BizShake will explicitly indicate this governance model in the company Article of Association so that the THSC will be also auditable by the authorities.
We at BizShake believe that many other projects will follow our example, implementing equal or similar governance models, allowing token-holders to scrutinize and actively be involved in the business they’re investing in.