[L]ack of proxy voting capability leaves vast numbers of investors out of the equation, and gives corporations inordinate power. Consider that roughly half of all American households, comprising tens of millions of people, have a stake in the stock market. But most own equities indirectly through funds — mainly index funds. That leaves fund managers with the decisive power over corporate governance, and the biggest fund companies have sided with management roughly 90 percent of the time.

As Mr. Coates wrote in 2018, “Control of most public companies — that is, the wealthiest organizations in the world, with more revenue than most states — will soon be concentrated in the hands of a dozen or fewer people.”

The title of his paper was “The Problem of Twelve,” referring to the unelected leaders of index fund operations. What’s worse, mutual fund companies are frequently conflicted. Many receive revenue from publicly traded corporations for providing financial services connected to retirement plans, yet have the responsibility of casting critical votes on how those companies are run. Scholars like Mr. Coates have worried about these conflicts for years….An independent S&P 500 index fund based in Honolulu, called INDEX, has taken a small step that could have revolutionary implications: This year, it has begun asking shareholders how they want to vote.

A Glimpse of a Future With True Shareholder Democracy – The New York Times