By David Benoit

Oct 21, 2016 3:33 pm ET

A Delaware judge is calling on institutional investors to protect their voting rights by turning to the blockchain.

Vice Chancellor J. Travis Laster thinks the bitcoin-backing technology would make a good plumbing system that would eliminate the middle-men in how shares are actually held and voted.

In a speech to the Council of Institutional Investors last month, released this week by CII, Mr. Laster urges shareholders to take charge in trying to fix what’s an archaic and complex system of who actually owns a share and how it gets cast in corporate decisions.

The idea isn’t entirely new. Delaware has been exploring blockchain technology already in the state and Mr. Laster has discussed the idea before.

Currently, the vast majority of shareholders are what as known as “beneficial” owners but their names aren’t on actual corporate books. That means it takes extra effort to exercise all types of rights, such as seeking a judge’s appraisal on a merger or getting a so-called legal proxy that lets one vote for any board candidate. (This latter problem could be removed soon by the SEC’s coming proposal to move to a universal ballot instead of competing ballots.)

The system creates a daisy chain of middlemen to determine who actually owns a stock and makes sure a vote is cast, argues Mr. Laster. (He goes into great depth if you want to read his full explanation about the chain.)

That costs money and creates the opportunity for mistakes.

“It generally works under normal circumstances, but when the system comes under pressure, it breaks down,” Mr. Laster’s prepared remarks say. “That should not be surprising. “

For voting, a system like blockchain that is transparent would allow holders to make sure their vote is tallied the way they want. Today, most voting is done through the company Broadridge Financial Solutions Inc. — brokers tell it how to vote based on their client wishes.

Earlier this year, T. Rowe Price found that a rare quirk in the system meant it hadn’t voted the way it wanted in the 2013 buyout of Dell Inc., meaning it couldn’t get the legal appraisal it had been fighting for and Mr. Laster was granting other shareholders. T. Rowe voted by telling Institutional Investor Services Inc., which in turn told Broadridge.

Mr. Laster argues a blockchain system would have made it easier for T. Rowe to make sure its instructions were followed. It could also eliminate general concern about over-voting and make it easier to determine who has the right to vote, he says.

“This is a carpe diem moment,” Mr. Laster said. “You can take the lead on distributed ledger technology, or you can let the intermediaries replace one intervening institution with another.”