Passive Investors Increasingly Exerting Corporate Influence
After years of exerting limited influence, passive investment funds are stepping up their involvement in shareholder votes. According to The Wall Street Journal, representatives of these funds are proving themselves increasingly willing to vote against current management if they see value in taking action and making changes. (Krouse, Oct. 24)
The classic wisdom for index funds has been that they should go along with prevailing market forces. However, the leaders of such passive shareholder groups have increasingly begun to see themselves as part of those forces and intercede where companies’ plans are perceived to go against what’s best for the investors.
With passive fund managers becoming potential deciding votes in major boardroom decisions, players including active fund leaders have stepped up efforts to court their support and draw them into action. From mergers to management changes, passive investors are having their voices heard.
As their stake in big businesses has steadily grown over the past few years, the leaders of these funds are ready to take action, performing in-depth research on the most dynamic companies in their portfolios and becoming tie-breaking votes that will steer the organizations.
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