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53 UC Davis L. Rev. 1453 (2019-2020)
Index Fund Enforcement

handle is hein.journals/davlr53 and id is 1473 raw text is: Index Fund Enforcement Alexander I. Platt* Corporate America today is astonishingly beholden to three large financial institutions: BlackRock, Vanguard, and State Street Global Advisors. As investors have moved their money into low-cost, highly diversified investment vehicles known as index funds, the so-called Big Three institutional fund managers that dominate the index fund industry have grown rapidly and accumulated unprecedented economic power and influence. For instance, these three institutions now vote one out of every four shares of stock issued by large U.S. companies. Policymakers and scholars have begun to sound the alarm about this concentration of corporate ownership, and have proposed reforms to reduce or eliminate these institutions' influence over portfolio companies. But concentrated power has its benefits, too. In this Article, I argue that the remarkable size, permanence, and cross-market scope of the Big Three's ownership stakes gives them the capacity and, in some cases, the incentive to punish and deter fraud and misconduct by portfolio companies. Corporate governance and securities regulation scholars have argued that these institutions have generally overriding incentives to refrain from meaningful corporate stewardship, but the facts on the ground tell a somewhat different story. Drawing on a comprehensive review of the Big Three's enforcement activities and interviews with key decision-makers for these institutions, I show how they have been using engagement, voting, and Copyright @ 2020 Alexander I. Platt. Climenko Fellow and Lecturer on Law, Harvard Law School. J.D. Yale Law School. For helpful comments, I thank Stephen Bainbridge, Lucian Bebchuk, John Coyle, Einer Elhauge, Elizabeth de Fontenay, Jesse Fried, Zachary Gubler, Scott Hirst, Howell Jackson, Reiner Kraakman, Da Lin, Ann Lipton, Peter Molk, John Morley, James Park, Menesh Patel, Holger Spamann, James Spindler, Urska Velikonja, David Zaring, participants in the Richmond Junior Faculty Workshop, the National Business Law Scholars Conference, the Harvard Corporate Law Faculty Workshop, the Harvard Law Corporate Fellows Workshop, the Southeastern Association of Law Schools Annual Conference, ClimenkoFest, the Corporate and Securities Litigation Workshop, and several anonymous inside and outside counsel for the Big Three. I also thank Elizabeth Ferrie for excellent research assistance, and Sophia Armstrong and her colleagues at the UC Davis Law Review for terrific editorial suggestions. 1453

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