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> The extremely simple and correct solution here is to not let index funds themselves vote. Only allow the votes to be cast directly by the index share holders.
by ellisv 7y ago
> The extremely simple and correct solution here is to not let index funds themselves vote. Only allow the votes to be cast directly by the index share holders. Problem solved, I don't know why people keep hand wringing about this and not suggesting the supremely obvious solution here.
Something like create a super-voting share class for active investors and regular stock for the index funds?
https://en.wikipedia.org/wiki/Super-voting_stock https://en.wikipedia.org/wiki/Super-voting_stock
- roenxi 7y agoAn interesting idea, but not appropriate in this instance. Super-voting stock are basically a polite way of retaining control while not appearing to own a majority of shares. They don't preserve the right incentive structure and remove escape valves the regular stock holders should enjoy. I thought the original idea here is to let the index investors direct the fund how to vote with their portion of the index's stock. A pretty neat idea that de-fangs much of the incentive risk if the index fund management goes rogue or an activist investor tries something.