Senate Republicans on Wednesday introduced legislation aimed at curbing Wall Street’s largest asset managers’ woke capitalist activism.
Sens. Pat Toomey (R-PA), the Senate Banking Committee ranking member, and Dan Sullivan (R-AK) introduced the Investor Democracy is Expected (INDEX) Act to curb Wall Street’s control over corporate ownership and voting power becoming increasingly concentrated within Wall Street’s largest investment advisers and their index funds.
As leaders in passive investing index funds, BlackRock, Vanguard, and State Street, which manage over $20 trillion in combined assets, have become some of the largest owners in most American public companies. Due to their outsized control over American companies, they can leverage their use of millions of index fund investors into becoming the dominant voting bloc at many investor meetings.
Toomey said that the bill would return the power to the average American from Wall Street:
In recent years, a small handful of large index fund managers have used a quirk in securities law to vote shares purchased with other people’s money. The INDEX Act returns voting power to the real shareholders — retail investors who put their own money at risk. Further democratizing investing and diminishing the consolidation of corporate voting power are concepts members of both parties should get behind.
The INDEX Act would require investment advisers of passively-managed funds to vote proxies in accordance with instructions of fund investors, not at the discretion of the asset managers. Toomey’s office contends that the INDEX Act would strip the asset managers’ activist power and foster a more competitive and democratic corporate system.
The American people deserve the opportunity to vote on behalf of their investments, including those made in index funds. Massive Wall Street firms should not be able to coopt this voting power to essentially control our entire public market. Currently, the three largest investment advisers vote nearly one-quarter of all shares cast at annual meetings, and are the largest shareholders in over 90 percent of S&P 500 companies. The INDEX Act would correct this extreme market distortion by simply requiring that the power to vote shares resides with the fund investors, not the advisers. This would democratize corporate governance and largely eliminate the influence that these firms wield at shareholder meetings, often to push political agendas. It would also remove these firms as a gateway for special interest groups who push radical agendas through corporate governance that they could not otherwise achieve through the traditional political process.
Sens. Mike Crapo (R-ID), Chuck Grassley (R-IA), John Cornyn (R-TX), Kevin Cramer (R-ND), Bill Hagerty (R-TN), Marco Rubio (R-FL), Thom Tillis (R-NC), Steve Daines (R-MT), Cynthia Lummis (R-WY), John Kennedy (R-LA), and Rick Scott (R-FL) sponsored the legislation.
BlackRock, Vanguard, and State Street, on top of managing over $20 trillion in combined assets, also:
- Cast roughly 25 percent of all votes at annual corporate shareholder meetings
- Are the largest shareholder in around 90 percent of S&P 500 companies
- Manage 82 percent of all assets flowing into investment funds over the last decade
- Manage between 73 and 80 percent of the exchange-traded fund (ETF) market
BlackRock CEO Larry Fink, as the leader of the world’s largest asset manager, has led the Wall Street campaign to pressure corporate America into adopting the left’s climate change agenda and controversial racial politics.
In December 2020, BlackRock said it would pressure companies to disclose the racial, ethnic, and gender makeup of their employees as well as the steps they are taking to advance “diversity, equity, and inclusion.”
Fink has also pushed environmental, social, and governance (ESG) investing to pressure public companies to comply with climate change policies and divert more investment funds towards green companies and away from the fossil fuel industry.
As Breitbart News’s Economics Editor, John Carney, has noted, ESG mandates have served as a boon to the green industry and made it more difficult to invest in fossil fuel production. This has led to lower oil rig production as oil has reached over $100 per barrel:
These funds shun fossil fuel investing. According to Deliote’s Center for Financial Services, professionally managed assets with ESG mandates swelled to $46 trillion globally in 2021, representing nearly 40 percent of all assets under management. The result of this is that it has become incredibly hard to raise funds for expanding fossil fuel production. So even oil prices above $100 a barrel are not attracting capital into the sector.
“In a recent episode of Bloomberg’s Odd Lots Podcast, Goldman Sachs’ top commodities strategist describes ESG investing as “a blunt instrument that is reducing capital flows into a very critical sector,” Carney added.