(James Saft is a Reuters columnist. The opinions expressed are his own) Lousy incentives for corporate stewardship is a flaw at the heart of our system of delegated asset management. What’s more, index funds, which are rapidly becoming the dominant force in investment management, have the lowest incentive to spend money to chivy the companies whose shares they hold to perform better. The upshot is that companies in the U.S. are increasingly free to act without proper shareholder oversight,...

Lousy incentives for corporate stewardship is a flaw at the heart of our system of delegated asset management. What’s more, index funds, which are rapidly becoming the dominant force in investment management, have the lowest incentive to spend money to chivy the companies whose shares they hold to perform better. The upshot is that companies in the U.S. are increasingly free to act without proper shareholder oversight, theoretically leading to more executive self-dealing, lower investment...