The passing of Jack Bogle, founder of The Vanguard Group, resulted in an abundance of articles highlighting his massive contributions to the financial world. The vast majority of them celebrated his creation of the Index Fund due to how it has lowered costs for the common investor. It’s particularly interesting then, to read Jack Bogle express concerns with the risk his own invention created.
His concerns are like another WSJ article written a year earlier, Index Funds Are Great For Investors, Risky For Corporate Governance.
At the heart of both articles is the concern of how, as index funds grow, institutional investors (State Street, Vanguard, etc) gain power governance of the companies invested in, but don’t necessarily carry the same incentive or capacity to contribute responsibly as voting members.
Historically, most financial catastrophes the US has suffered through have come about by not preemptively problem solving when risks are identified. Currently, this issue has only been raised by a handful of thought leaders within the financial industry. Beyond sharing this message to raise awareness, you can act directly by contacting the SEC.