My conclusion is that C.E.O.s have performed an artful head fake with their high-sounding promises, deflecting public attention from the Roundtable’s decades-long advocacy of measures to weaken regulations and reduce the already attenuated power of shareholders.
What you won’t find in the Roundtable’s statement is this: For-profit companies exist to serve their owners, not their executives, yet most owners are relegated to an entirely passive role. And if there is to be any real hope of shareholder democracy and humane capitalism, millions of people need to be able to exercise the latent power that ownership implies.
I’m talking about “worker-investors,” as former Delaware Chief Justice Leo Strine calls us — and, yes, I’m proudly in this vast group, which includes great masses of people who must invest in order to have any hope of sending our children to college, living in a decent home and having a comfortable retirement. Our wealth, such as it is, comes from our jobs. Collectively, we have a potentially dominant stake in corporate America through pension funds, mutual funds and exchange-traded funds.
But because we are, for the most part, indirect investors — without shares in publicly traded companies in our own names — we must rely on the managers of our pension and mutual funds to speak and vote for us at corporate meetings and in proxy battles.
Yet while the fees and performance of fund managers are extensively covered, relatively little attention has been given to their role in corporate governance. With the help of Morningstar, I’ll start remedying that omission now.
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BlackRock and Vanguard, the two giants of low-cost index investing, have been scooping up money because of their funds’ solid performance. But Morningstar’s analysis of mutual fund proxy voting suggests that it may be time to add another criterion when selecting a fund for investment: a fund company’s voting records. In this dimension, the two giants underperform. State Street, Fidelity and many other fund companies are doing much better.
If you want a greater impact, you can move your money. One person may not have much effect but if thousands of people do it, the fund companies will surely hear their voices.