As assets continue to flow from actively managed to passively managed strategies, the largest index asset managers1 are becoming increasingly influential, often ranking among the largest investors of public companies. Despite this fact, little research has been done to understand how index managers carry out their investment stewardship responsibilities.
It is legitimate to assume that index managers have little incentive to allocate resources to monitor corporate governance of investee companies, because, after all, index managers tend to compete on fees, and their overriding objective is to match the performance of indexes. Our research shows, however, that the notion that these managers take a laissez-faire approach to governance could not be further from the truth.
Hortense Bioy, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.