**7. Blockchain Governance and Ethical Aspects**

Governance of blockchains is a key issue. Public blockchains are governed autonomously by software code. The code specifies inputs, the priority and timing and limits the sizes or contingencies associated with encoding every transaction into the blockchain (Atzori 2015). These parameters of governance in a blockchain are similar to the regulations specified by stock exchanges for listed firms. Most corporations that are exploring blockchain projects are using permissioned blockchains such as a permissioned version of Ethereum. However, even in permissioned blockchains, governance rules would need to be negotiated and renegotiated, similar to partnerships or other customized financial contracts (Paech 2017). Beck et al. (2018) provide an excellent discussion on blockchain governance from a DAO case study perspective. Table 8 summarizes present regulation of blockchain technology in several selected countries.

#### *Ethical Aspects of Blockchain*

A key relevance of blockchains to financialmarketsisitsimmutability (Papadopoulos 2015), thuslimiting or removing a firm managements' ability to influence accounting records and other business transactions ex-post. Fraudulent activities such as using employee stock options to extract private benefits at the shareholder's expense by backdating the option date when price levels are lowest (Bray and Mathews 2011) would be mitigated by blockchain adoption. It is our view that the high level of transparency provided by blockchain would reveal more high-quality information and increased speed to shareholders. This in turn would increase firm management accountability to shareholders, regulators and other market participants. Tapscott and Tapscott (2017) argue that blockchains introduce a novel sphere of business integrity of transparency, honesty, consideration and accountability, which in turn would result in better accurate pricing of executive compensation and asset prices in general. Ultimately, blockchains may shift power from firm management towards shareholders, employees and regulators (Yermack 2017).

In addition, blockchains can help solve coordination, verification, authentication and enforcement issues. For example, extremely high transaction costs and many breaches of the law go unnoticed. Even if such breaches are identified, it is often too late, with substantial damage already ensured (Brummer 2015). Finally, in our view, an overlooked feature of blockchain is its potential in preventing wrongdoing. For example, instead of designing a regulatory system to attempt to prevent empty

voting, empty voting can be prevented as follows: shares can be in effect programmed so that following the sale of a share, it is stripped of voting rights for a set period; nor would an individual be able to borrow a share and vote using that particular share.


