Index funds have democratised access to diversified investment for millions of savers who are investing for long term goals, like retirement.
However, the popularity of index funds has drawn critics, who claim that index fund managers may wield outsized influence over corporations through their proxy voting and engagement.
Executive compensation is often cited as an example, with ‘say-on-pay’ votes. But executive compensation is neither structured nor decided by shareholders. Rather, a process is undertaken by the board of directors and this Policy Spotlight provides an explanation of that process, and the role of shareholders.