Today, Sen. Chuck Grassley (R-Iowa), a member of the Finance Committee, joined Sen. Dan Sullivan (R-Alaska) to introduce legislation, known as the INDEX Act, to give investors a greater say in shareholder votes cast with their own investment dollars. With mutual funds and index funds, known as passive investing, exploding in popularity over the past two decades, investment firms have quietly become the largest owners in almost all public U.S. companies. As such, they are able to leverage the investments of millions of index fund investors into the dominant voting bloc at shareholder meetings.
“If you have financial stake in a company, you should have a say in that company’s decision-making process – but too often, shareholders are at the whim of Wall Street advisors who are not required to put the best interest of investors above their personal agendas or motives. Our common sense proposal will cultivate much-needed transparency and ensure advisors answer to their investors, not the other way around,” Grassley said.
“The American people deserve the opportunity to vote on behalf of their investments, including those made in index funds. Massive Wall Street firms should not be able to coopt this voting power to essentially control our entire public market,” Sullivan said. “Currently, the three largest investment advisers represent nearly one-quarter of all votes cast at annual meetings. The INDEX Act would correct this extreme distortion by simply requiring these firms to ask index fund investors how to vote. This would democratize corporate governance and largely eliminate the influence that these firms wield at shareholder meetings to push political agendas, removing them as a pressure point for radical activists.”
The INDEX Act would require investment advisors of passively-managed funds to vote proxies in accordance with the instructions of fund investors — not at the discretion of the adviser. The adviser would be responsible for passing through the proxies, collecting the instructions and dutifully voting according to the investors’ wishes.
Decentralizing this voting power will neutralize the dominance of these investment advisers and foster a healthier, more competitive and more democratic corporate governance ecosystem.
Joining Grassley and Sullivan as original cosponsors are Sens. Pat Toomey (R-Pa.), Mike Crapo (R-Idaho), John Cornyn (R-Texas), Kevin Cramer (R-N.D.), Bill Hagerty (R-Tenn.) Marco Rubio (R-Fla.), Thom Tillis (R-N.C.), Steve Daines (R-Mont.), Cynthia Lummis (R-Wyo.) and John Kennedy (R-La.).
Original source can be found here
