Originally posted by TexasHusker
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John Bogle noted this in his book "Battle For the Soul of Capitalism". What he basically argued was that ownership has become to diffuse for owners to force managers to act in the interests of shareholders. Essentially, Bogle said that concentrated ownership of companies has declined precipitously over the years. This has resulted in ownership becoming divided among thousands of small shareholders. He also argues that intermediaries are passive or conflicted, and boards are generally not effective in forcing management to act in the shareholder's best interests.
As a result, management tends to act in their own interests, which results in larger salaries and bonuses paid to themselves.
The irony here is that index investing, which he pioneered, has contributed to this.
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