Alaska U.S. Sen. Dan Sullivan introduced the Investor Democracy Is Expected (INDEX) Act to address problems stemming from the consolidated corporate ownership and voting power within Wall Street’s largest investment advisers and their index funds. With investing booming in popularity over the past two decades, these firms have quietly become the largest owners in almost all public U.S. companies, and they are able to leverage the investments of millions of index fund investors into the dominant voting bloc at shareholder meetings.
Sullivan said that Alaskans have invested their hard-earned dollars in major companies across the U.S., but their voices have been co-opted by advisors that have their own agenda. He said that Wall Street firms should not be able to coopt this voting power to control the public market. Sullivan was joined by a group of Republican Senators who aired similar sentiment.
Sen. Sullivan recently addressed the situation on CNBC’s Squawk Box:
“It is intended to get the voting power back to the beneficial owners of the shares, not to the index fund managers. And the big reason is the market distortion of the power that these index fund managers have. Think about the numbers, now they fluctuate, depending on where the market is, but over $20 trillion managed by the Big Three BlackRock, Vanguard, State Street, over 25% of all shares, voted on in public companies are voted on by these three, and they’re the largest shareholder in over 90% of the S & P 500 companies. And so to me, that is an enormous market distortion. And we need to bring the shareholder power back to the beneficiary owners of the shares. This is really a quirk in the law, that they have this much power to vote the shares. Nothing against these companies. They’ve done a great job in terms of lowering fees and doing passive investments which many American investors want, but they don’t want them to have all the power, particularly in terms of corporate governance.”
Sen. Sullivan says that deconsolidating this voting power will neutralize the dominance of these investment advisers and foster a healthier, more competitive, and more democratic corporate governance ecosystem.
Click here for more information on the INDEX Act.
