Saturday, November 05, 2016

Letter RE "New Corporate Power Brokers: Passive Investors," WSJ

I read the recent article about passive investing and the influence
of index funds on corporate boards with great interest. It's
instructive to think of the extreme situation where index investors
make up a larger and larger share of the overall stock market, yet
the incentives on these investors is very much to minimize their cost,
and not to spend money retaining people to actively investigate the
companies they own. One wonders if this extreme will lead to appropriate
oversight. It certainly will lead to more management decisions being decided by
an increasingly small fraction of shares owned by active investors.

Unpublished letter in response to:

New Corp. Power Brokers: Passive Investors, WSJ

Also relevant:

New Corporate Power Brokers: Passive Investors
Control from those w. strong incentives to spend less time on