Able but not willing: the failure of mutual fund advisers to advocate for shareholders' rights

Approximately 77.7 million individuals in the US invest in equities through stock mutual funds. When these investors put their money to work and at risk, they depend upon strong corporate governance structures at corporations (portfolio companies) held by the mutual funds that they own. Unlike direct retail investors who can take action to influence corporate governance, these 77.7 million individuals depend upon mutual fund advisers (Advisers) to advocate for them. In its conclusion, this paper takes a broader perspective, suggesting that corporate governance scholars and reformers use the mutual fund case to reexamine the prevailing framework that is largely based upon the agency problem recognized in 1932 by Adolf Berle and Gardiner Means. Berle and Means saw a shift between the nineteenth- and twentieth-century business enterprises. In response to the fruition of their observations, much of corporate governance work focuses on that power balance between management and owners, and seeks to find ways to enhance shareholders' rights.