Early in 2017, Dole Foods discovered via a class action lawsuit it had made a big oversight way back in 2013, when it went from public to private. To their surprise, they learned that there were 12 million more shares of its stock outstanding than it had previously thought. The lawsuit seems to have exposed a general weakness in the overall market system, although many of the details of how and why this happened remain difficult to parse out. Nonetheless, the judge in the case offered a possible solution in his opinion: blockchain technology. How might this have helped to prevent the Dole fiasco, and what could it do in the future?
Delaware's Blockchain Initiative
In his opinion on the Dole case, Delaware Chancery Court vice chancellor J. Travis Laster indicated at one point that the Blockchain Initiative of Delaware state might have helped Dole to discover and deal with the discrepancy in stock figures before it had caused legal action. According to CoinDesk, Laster said blockchain could be "a single and comprehensive stock ownership ledger" for the industry. What does this mean?
Many companies have shifted their ledgers over to blockchain technology. Blockchain was originally developed as a means for tracking and logging transactions associated with Bitcoin, including the mining of the digital currency and subsequent buys and sells involving it. Some companies, like Overstock, have already faced the messy traditional means of tabulating and tracking stock ledgers and have concluded that blockchain is safer and more reliable. To those companies, the traditional system causes problems because it takes about three days for a single trade to fully settle and because stock beneficiaries typically do not own the stock itself, but instead an IOU in the amount of their purchase. These companies see blockchain as a means of clarifying who actually owns the stock itself and reducing time between the transaction itself and the clearing and logging of that transaction.
What is Behind Dole's Failure?
Dole's stock issues began in 2013, when the company went private. Following a class action suit by shareholders, the company's CEO, David Murdock, was obligated to pay an additional fee per share. While Dole eventually had record of roughly 37 million shares converted in this way, there seem to have actually been about 49 million shares to qualify for the added payment. Proponents of the Blockchain Initiative argue that this discrepancy would not have happened with blockchain. The Initiative aims to link the auditing process which is key to accurate recordkeeping with the speed of blockchain, allowing companies to better be able to document where their stock is and who owns shares. So far, blockchain use among traditional companies has been slow to take off, but perhaps cases like Dole's will prompt more executives to look into ways of utilizing the newest technology to streamline and protect their stock ledgers.