UChicago academics are publicly calling on index fundsters to abstain from proxy votes. And Bill McNabb
is having none of that.
] chief penned
a letter to the editor in today's Wall Street Journal
, pushing back against an opinion piece by University of Chicago Law School professor M. Todd Henderson
and UChicago Law teaching fellow Dorothy Shapiro Lund
that was published
last month (also in the WSJ
). Henderson and Lund claimed that "no passive investor cares much about governance of a particular company" and call for "encouraging passive institutional investors to abstain from voting altogether." McNabb fires back that Henderson and Lund's suggestion "is irresponsible and ill-informed."
"Index fund managers care about good governance more than anyone else," McNabb writes. "We are the ultimate long-term investors because we own stocks forever. Therefore, our vote and our voice on governance are the most important levers we have to protect our clients' investments."
After all, while active fundsters and other investors can "vote with their feet" by selling a company when they disapprove of management or strategy, index fundsters still have to hold that company if it's part of the index.
"Any proposal to concentrate voting power in the hands of active managers (who represent a steadily declining ownership stake) is akin to taking political voting rights away from permanent residents and giving them only to visitors," McNabb adds.
Neil Anderson, Managing Editor
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