Opportunism in the Shareholder Voting and Engagement of the ‘Big Three’ Investment Advisers to Index Funds

Journal of Corporation Law, Volume 48

48 Pages Posted: 4 Jan 2022 Last revised: 21 Oct 2022

See all articles by Bernard S. Sharfman

Bernard S. Sharfman

RealClearFoundation; Law & Economics Center at George Mason University’s Antonin Scalia Law School; affiliation not provided to SSRN

Date Written: February 5, 2022

Abstract

The Big Three investment advisers to index funds (BlackRock, Vanguard, and State Street) need to be understood as agents of those who invest in the mutual funds and exchange traded funds they manage. They are not institutional investors, the role performed by the funds they manage, but investment advisers. As such, they are agents, prone to acts of opportunism like any other agent. Corrective measures are required to discourage their opportunistic behavior. To mitigate such behavior, this Article proposes both a market solution and the use of fiduciary duties.

Keywords: investment advisers, shareholder voting, empty voting, opportunism, Big Three, index funds, mutual funds, ETFs

JEL Classification: G34, G38, K22

Suggested Citation

Sharfman, Bernard S., Opportunism in the Shareholder Voting and Engagement of the ‘Big Three’ Investment Advisers to Index Funds (February 5, 2022). Journal of Corporation Law, Volume 48 , Available at SSRN: https://ssrn.com/abstract=3995714 or http://dx.doi.org/10.2139/ssrn.3995714

Law & Economics Center at George Mason University’s Antonin Scalia Law School ( email )

affiliation not provided to SSRN

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