Investor Control: Index Fund Shareholders Gain Direct Corporate Voting Rights.
The INDEX Act aims to empower individual investors by requiring passively managed funds, such as index funds, to pass proxy voting rights directly to the people who hold shares in those funds. This change ensures that if you invest in an index fund, you will have a direct say in corporate decisions, including director elections and major company proposals. This shifts voting power away from large fund managers and toward the underlying investors.
Key points
Passively managed funds must allow individual investors to provide direct voting instructions for corporate proxies if the fund's holding exceeds 1% of the company's voting authority.
This grants investors in index funds a direct voice in corporate governance matters of the companies held by the fund.
If an investor fails to provide instructions, the fund generally cannot vote those shares, except for routine matters or proportional voting in specific cases.
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