Press releases

WASHINGTON — Sen. John Kennedy (R-La.) today joined Sen. Dan Sullivan (R-Alaska) and Republican colleagues in introducing the Investor Democracy is Expected (INDEX) Act to address problems stemming from the consolidated corporate ownership and voting power within Wall Street’s largest investment advisers and their index funds.

With passive investing exploding in popularity over the past two decades, these firms have quietly become the largest owners in almost all U.S. public companies. As such, they are able to leverage the investments of millions of index fund investors into the dominant voting bloc at shareholder meetings.

“Mammoth investment advisors are listening more to radical activists than to their actual investors, which can sway outcomes at shareholder meetings. That’s bad for the investors who have put their savings on the line and for healthy, free markets. We need to ensure that investors actually get to vote on their investments, and that’s what the INDEX Act would do,” said Kennedy.

“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 U.S. public market. Currently, the three largest investment advisers represent nearly a 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,” said Sullivan.

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 per the investors’ wishes. Deconsolidating this voting power will neutralize the dominance of these investment advisers and foster a healthier, more competitive and more democratic corporate governance ecosystem.

Sens. Pat Toomey (R-Pa.), Mike Crapo (R-Idaho), Chuck Grassley (R-Iowa), 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.) and Cynthia Lummis (R-Wyo.) also co-sponsored the bill.