INDEX Investors Empowered by Iconikapp

INDEX Investors Empowered by Iconikapp

INDEX investors empowered by iconikapp can regain control of capitalism from the financial services industry. Invest indirectly in 500 companies & vote YOUR VALUES AUTOMATICALLY before each annual shareholder meeting.

ONEFUND (ticker symbol INDEX) partnered with to give retail investors a say in how the fund’s shares are voted. Iconikapp’s technology enables fund managers to vote proportionally to reflect the preferences of their investors on the full range of environmental, social, and governance (ESG) issues. This could mark a turning point in corporate governance. Individuals can now automatically vote for our values rather than relying on fiduciary lemmings. Details on how are below. (press release)

Larry Fink writes his annual CEO letter (BlackRock), with reporting from Institutional Investor and comment from Wachtell (CLS Blue Sky Blog) and Business Law Prof Blog (Institutional Investor). Based on public opinion surveys, Just Capital ranks Walmart 3rd on how it prioritizes corporate governance, even though Walmart is a controlled company. I look forward to similar analyses and comment on voting preferences and ranking expressed through by actual human beings. Finally, we can step outside the fiduciary duty conventions of mythical lemming-like behavior.

INDEX Investors Empowered by Iconikapp: Background

When Harry Markowitz won the Nobel Prize for inventing Modern Portfolio Theory (MPT) in 1952, leading to diversification through index funds, institutions owned 8% of the US equity market. Then, proxy voting, the heart of corporate governance, was controlled by retail investors. Today, institutional investors control about 80% of publicly traded equities. In the US and UK, the largest 20 hold 55%.

One of Markowitz’s many assumptions was that individual investors were virtually powerless. However, today it is widely acknowledged that the growth in passively managed equity index funds is accompanied by a corresponding rise in systematic market risk. As a result, index investing has created a nation of universal owners.

MPT Outdated

As Jon Lukomnik and James P. Hawley point out, we internalize a proportion of the economic externalities each firm in our portfolio generates. We, therefore, have a financial and real-world interest in minimizing and mitigating negative externalities. Contributions to the climate crisis depress the value of other companies in our portfolio and reduce the viability of life as we know it on planet earth. (see The Shareholder Commons)

Much has happened since MPT  was invented. Computing power, for one, increased a trillion times between 1965 and 2015. ONEFUND’s INDEX investors can now utilize tools developed by iconikapp to begin taking back control of capitalism. INDEX investors need not be passive. We can now vote for our values. That should give capitalism a better chance of addressing systematic risks by creating virtuous feedback loops between those values and the world we help co-create.

Legislation Driving Renewed Interest in Pass-Through Voting

The Investor Democracy is EXpected Act, or the INDEX Act seeks to establish guidelines for passively managed funds, such as index funds, to vote shares on behalf of fund investors in proxy shareholder votes. According to S.4241 – 117th Congress (2021-2022), these funds must generally vote shares on a proportional basis according to instructions from fund investors. The INDEX Act seeks to address problems stemming from the consolidated corporate ownership and voting power within Wall Street’s largest investment advisers and their index funds. The Act would also require any asset manager of a passive index fund with more than 1% of a company’s voting shares to vote those shares in accordance with the instructions of the fund’s investors or choose not to vote at all.

Republican attorneys general from 21 US states wrote to proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis, asking whether their voting recommendations on such issues as climate and boardroom diversity violated duties to clients. Companies have shown that just because proxy advisers recommend something doesn’t mean it will become policy. A December hearing in Texas featured testimony from BlackRock and State Street executives, giving the air of a legal proceeding. These results suggest that the Republican attorney generals have threatened legal action regarding ISS and Glass Lewis voting policies.

Questionable Motives

Learn more about the sponsor and co-sponsor of the INDEX Act. While I do not support legislation, such as the INDEX Act, which would likely suppress the overall vote and reduce participation in corporate governance, I do support the idea of asset managers and owners surveying investors and beneficiaries on their voting preferences. See the Academic Perspective below. The more use of Iconikapp and similar vehicles spread, the more ultimate owners will take responsibility for the actions of our corporate agents and the more our future will align with our goals. INDEX, the fund offered by ONEFUND is unrelated to the INDEX Act.

Comments from Nell Minow on the INDEX Act

Nell Minow is an American film reviewer who writes and speaks frequently on film, media, corporate governance, and investing.  She was formerly a Principal of LENS, a $100 million investment firm that bought stock in underperforming companies and used shareholder activism to increase their value.  Minow also served as President of Institutional Shareholder Services, Inc., a firm that advises institutional investors on proxy voting, and as an attorney at the EPA, OMB, and DOJ. She is currently Vice Chair of ValueEdge Advisors. I love that Fortune magazine dubbed her “the CEO killer” for her early warnings–back in 2000–of mismanagement at Enron and Global Crossing. 

I always love coming down to the right of Republicans when it comes to the free market. There are legitimate reasons to be concerned about the concentration of share ownership in passive accounts. Bob Monks documents some of them in his book, Citizens DisUnited, such as the underperformance of companies with majority ownership from index funds because there are no shareholders with enough of a commitment to the company to provide the essential oversight that markets require to remain vibrant, credible, and efficient.

But the Republicans are not trying to address this problem as a matter of policy; they are trying to undermine even the small impact of investors who do not have the option of selling the stock, diminishing their only other opportunity for expressing their concerns. Index funds are successful with investors because they have provided more reliable returns than managed funds, with lower fees. The data show that they do not always act strictly as fiduciaries in voting proxies. As the late Jack Bogle used to point out, when it comes to portfolio companies, funds like to please their customers and the firms they hope to get as customers, which includes everyone.

What we need is more transparency and better enforcement of fund managers’ obligation as fiduciaries, not proposals that diminish voting power so severely it risks the chaos of failing to meet the requirements of a voting quorum.

Always follow the money. The push for this legislation is not coming from the customers of index funds. It’s coming from corporate insiders who can’t stand the heat from some advisory-only votes on CEO compensation and shareholder proposals. Before you consider this legislative proposal, check to see who is contributing to the campaign funds for those supporting it.

INDEX Investors Empowered by Iconikapp: Mike Willis and Todd Johnson

Said ONEFUND Chief Executive Officer Mike Willis:

Fund managers have too much influence over public companies, and they often wield that influence in ways that aren’t consistent with the values of their investors. Through this partnership, our INDEX investors will have access to breakthrough technology designed to flip control back to them. Rather than rifling through hundreds of ballots, they will be able to set up their VoteForge profile in minutes, and be heard on the issues that matter to them.

Iconikapp uses each investor’s voting profile (and percentage ownership of the fund) to calculate voting data that fund managers can use to implement pro-rata voting easily. It also provides fund management with key insights about where their investors stand on issues of importance.

According to co-founder Todd Johnson:

ONEFUND is resolved to return voting power back to individual investors. We were the first index fund to open up the proxy process to shareholders. And now with iconik, we’re making it even easier for investors holding INDEX – yes, that’s our ticker symbol – to make their voice heard.

In 2023 mutual funds are under increasing pressure from investors and policymakers to fix a proxy process that concentrates voting power with asset managers and away from the actual owners – individual investors.

INDEX Investors Empowered by Iconikapp: Alex Thaler and Alan Reid

Alex Thaler, CEO of Iconikapp, said the following about Iconikapp’s empowering tool:

Fund managers are being scrutinized like never before when it comes to how they’re exercising their voting power. In the early days of corporate governance, shareholders showed up in person and raised their hands to vote. Their voices were heard. Fast forward a few hundred years and ownership is now managed through funds and other intermediaries that attempt to speak for thousands or hundreds of thousands of investors. People are waking up to the fact that these funds aren’t representing their values. Our platform offers a simple, elegant way for funds to honor the voices of their investors.

Explains iconikapp Co-Founder and President Alan Reid:

You can’t inundate people with information without context. We’re leading a major reset in favor of shareholder participation with technology designed to streamline the investor experience. In the process, we’re solving the accountability problem for fund managers while creating opportunities for them to understand what matters most to their clients.

INDEX Investors Empowered by Iconikapp: Fisch and Schwartz

“Corporate governance is changing.” write academics Jill E. Fisch and Jeff Schwartz in the recently published Corporate Democracy and the Intermediary Voting Dilemma, U of Penn, Inst for Law & Econ Research Paper No. 06, 2023. (available on SSRN, and a “must” read)

For the past two decades, the focus of shareholder voting and engagement was deconstructing impediments to shareholder power and increasing managerial accountability. The goal of these interventions was to increase firm value by reducing agency costs. Increasingly, however, environmental and social issues have risen to the fore.

This new focus is arguably more about values than value…institutional intermediaries— pension and mutual fund managers—can no longer vote and engage on the affairs of their portfolio companies without seeking the input of the pension-plan participants and mutual-fund shareholders who are their beneficiaries.

We argue that the fiduciary duties of fund managers compel them to seek this input. We further argue that regulators should supplement existing fiduciary standards by adopting formal requirements that managers of mutual funds and pension funds seek input from their beneficiaries on their views, reflect those views in their engagement efforts and their votes, and publicly disclose how they have complied.

At the same time, we caution against an approach in which fund managers shirk their intermediary role by implementing pass-through voting or rigidly voting in proportion to the preferences expressed by their beneficiaries. Instead, fund managers should act like elected representatives. They should continue to exercise voting power for the securities in the portfolios that they manage and should have discretion in how to incorporate the input they receive from fund beneficiaries.

This enables professional fund managers to use their sophistication and experience to translate beneficiary preferences—which might be incomplete, vague, and contradictory—into individualized and informed votes at each of their portfolio firms. It also retains the ability of fund managers to leverage the economic power of dispersed beneficiaries consistent with their historical success in reducing the traditional collective action problems associated with shareholder voting. In reconceptualizing the role of intermediaries, this approach preserves the benefits of intermediation while better aligning intermediary stewardship with beneficiary best interests.

While the financial services industry has undergone a digital transformation around trading and client interfaces, the process of voting proxies remains antiquated. Individual investors also lack the voting resources and tools available to wealthy institutional investors. It’s understandable that 88% of these investors don’t vote… Iconik…is perhaps the most promising new effort to engage investors.

A Few Observations on the Paper by Fisch and Schwartz

Issues like how to address climate change or wealth inequality are fundamental issues of public policy. We should not always be required to frame them in terms of what will maximize our return, especially at any specific company that may externalize costs, resulting in losses elsewhere in our portfolio. (see What does the Facebook board care about?) questions.

Corporations have been responsive to the demands of institutional investors. “The problem today is the agency costs between fund managers and their beneficiaries.” Funds are obligated to vote and engage in accordance with the interests of fund beneficiaries. Yet, existing regulations don’t require fund managers to determine beneficiary/investor preferences.

“Stewardship, it turns out, is relatively hard, potentially costly, and generates little, if any, profit for fund managers.” The largest funds are mostly indexed. They are in business to make money largely by cutting costs. Funds have little incentive to monitor and advocate for change since most of the benefits gained will go to their competition, which together manage far more stock in any given company.

“To our knowledge, there has not been a successful claim that institutional investors have failed the best interest standard when voting shares in their portfolio companies.” Ironically, this was an issue I posed in my first post on this site in 1995. (Fiduciary Responsibilities for Proxy Voting)

Fisch and Schwartz question “whether it is possible to produce easily digestible voting information and whether individual investors have the capacity and desire to engage with it, particularly in the context of mutual fund portfolios that hold hundreds of companies.”

Issues are complex and even the same values may need to be applied differently at different companies.

Iconik, however, is perhaps the most promising new effort to engage investors through a platform for shareholders to indicate their voting preferences.

Iconik claims that “[i]t only takes minutes to create an iconik voting profile that automatically votes shares to match values across a portfolio or group of portfolios.” This is precisely the type of polling we envision and illustrates the feasibility of our approach.

Iconik’s tools can help funds, their investors/beneficiaries reach their financial goals, and their moral commitments.

INDEX Investors Empowered by Iconikapp: Caleb Griffin

Another academic, Caleb N. Griffin, notes that “corporate governance evolved in a different era for a type of investor that is no longer typical today.” Most Americans own broadly invested index funds, not stocks in individual companies. Like Fisch and Schwartz, Griffin bemoans that “legal and structural impediments prevent these ‘human investors’ from fully participating in corporate democracy.” Like Fisch and Schwartz, Griffin points to the meaninglessness of fund fiduciary duties to vote proxies in the “best interests” of investors.

(N)o fund manager makes any reasonable attempt to ascertain their investors’ priorities. Most funds assume the only common dominator of investors is a desire for short-term profits…

Most investors have so little at stake, the argument goes, that it is economically irrational for them to vote in corporate elections. What this argument misses is that investors’ rational apathy is not fixed. Instead, it is a function of the costs and benefits of voting. If we increase the impact of voting, while reducing the barriers and complexity, fewer shareholders will be apathetic.

HCG 1Griffin’s research (Humanizing Corporate Governance) finds that “human investors have strong, surprisingly prosocial views on numerous topics impacting American corporations. If these views were translated into actual votes, the impact would be profound.” He presents the results of an original survey of 1,611 owners of index funds and/or ETFs. The survey found a widespread willingness by investors to sacrifice profits in three different contexts: to benefit employees, to benefit the community and/or society at large, and to benefit the environment.

Figure 1 provides the results from a survey of 1,611 index fund and ETF owners conducted in June of 2021, balanced against the U.S. Census to ensure respondents represent the broader population in terms of age and gender. Nearly half of respondents would be willing sacrifices returns for benefits “usually” or “always.” Only 1.8% to 3.0% would never make financial sacrifices for social ends.

HCG 2What explains this “irrational” willingness to make financial sacrifices? One might attempt to dismiss these results on the grounds that they are dominated by less wealthy Americans who have little invested in the stock market and therefore do not have much to lose. Conversely, one might speculate that those of limited means might be more hesitant to make financial sacrifices. However, the data does not strongly support either view. Although there is slight variation based on income, Figure 2 reveals that an overwhelming majority of those surveyed supported at least the occasional sacrificing of profits for social outcomes, regardless of income.

A second justification for these findings might be age. Perhaps these prosocial views are espoused predominantly by the younger generations who have yet to amass any considerable stockholdings and who have yet to discard the supposed financial naïveté of the young. This second potential justification is also not supported by the data. (Figure 3) Although there is a slight decrease in support amongst members of older generations, it is not enough to negate the overall proposition that the vast majority of human investors of every generation are willing to sacrifice profits in the pursuit of social causes.HCG 3

Griffin’s Proposed Reforms

Griffin proposes several corporate governance reforms. Fund managers should be required to discern the “best interests” of investors through good-faith efforts and should vote in accord with that input.

If a fund shareholder opts not to provide input, the shares representing their economic interest should be voted proportionately in accordance with the shares for which input was received.

Note that is substantially different than the INDEX Act, which allows funds to default to not voting, which would increase the power of corporate boards  He recognizes such surveys of investors could be expensive, so another option would investors to delegate voting authority such as As You Vote. (I assume Griffin did not know of Iconikapp when he wrote his paper.)

Griffin goes on to also recommend changes to shareholder proposals, engagement, stewardship team representation, etc. Those are beyond the scope of this current discussion but point to a “framework that would empower human investors and make mutual fund managers more accountable.” I will just note that he recommends large funds create stewardship teams to solicit input from investors on issues that funds would then put forward as shareholder proposals or other forms of engagement. Since index funds largely compete on the basis of minimizing costs, I see Griffin’s objectives largely carried out through partnerships between funds and advocates, such as The Shareholder Commons and As You Sow.

INDEX Investors Empowered by Iconikapp: Andrew Behar & Voting Options

Andrew Behar, CEO of shareholder advocacy non-profit As You Sow, which manages’s As You Vote ESG+ voting option, wrote the following:

Historically, retail shareholders have found it to be too difficult to use the power of their proxy vote – even though they represent around 31% of every company, iconik has a tool that empowers everyone to express their values by voting their proxies.
Onefund choices

Currently, INDEX investors have five voting options available. I recommend either As You Vote ESG+ or creating your voting profile from scratch. Eventually, I hope to see a combination of the two offered by Iconikapp so that if my voting profile fails to address a specific issue, my vote will default to As You Vote ESG+.

Shareholder Protections

Includes voting rules designed to enhance board accountability, limit mechanisms that may entrench current board members, protect voting rights, and support the board’s independence. This voting profile does not include voting rules relating to environmental or social issues.


Includes voting rules that follow management’s recommendation on all ballot items except when the board failed to act when it was required to do so.

Fiscally Conservative

Supports voting rules focused on maximizing returns for investors. In general, it votes against shareholder proposals on environmental and social issues.

Catholic Values

Incorporates investment guidelines from the US Conference of Catholic Bishops (last accessed 2/16/23).

As You Vote ESG+

As You Sow, the nation’s leading progressive shareholder advocacy organization manages this voting profile. ESG+ encompasses the full range of progressive proxy voting, including issues related to climate change, racial justice, ocean plastics, industrial farming, and modern slavery.

Create My Own Using iconik VoteForge

VoteForge enables users to create personalized voting profiles that match their values by completing an online assessment around the issues that matter to them and skipping the ones that don’t. Each unique voting profile automatically votes shares across a portfolio. iconik is the first and only service to close the loop with personalized impact reports.

My Experience Testing Iconikapp

I own stocks from hundreds of issuers individually and in 500 companies through ONEFUND. I’ve been using Iconikapp for several months to vote stock held in my brokerage accounts and, more recently, for my small holding in ONEFUND INDEX. My overall experience has been fantastic. The tool saves me countless hours reading through proxies to vote conscientiously. It also saves me from just giving up and failing to vote.

DISCLOSURE: I like ONEFUND’s idea of soliciting input from investors on proxy voting, so I invested a small amount through them about two years ago. Initially, they were simply allowing investors to fill out individual proxies as a form of feedback. I told Mike Willis that was nuts. Even fanatics like me would not take the time. ONEFUND tried other mechanisms and has now settled on Iconikapp. I am delighted. I also love Ikonicapp so much that I invested a small amount in the company. See Disclosure of Possible conflicts of Interest.

I know treasurers of small institutional investors that have no proxy voting policies. They frequently don’t vote or just vote as boards recommend. Iconikapp would help them create a proxy voting policy in a few minutes, would cast votes automatically, and not only keeps a record of those votes but also why they were voted as they were.

No, I don’t think their system is better than custom services offered by services like ISS, Glass Lewis, or Egan-Jones, especially when it comes to proxy contests for board positions. However, I am sure Iconikapp is much more affordable for small institutions and individuals. Iconikapp is far smarter and easier than voting on your own, especially since you can always override your automated votes.

Soon after I started I testified at the SEC on the need to allow client-directed voting for retail shareholders-based proxy voting policies, just as institutional investors can. I also began working with others to offer proxy voting tools and advice to retail shareholders, including the following:

Iconikapp is the most promising tool ever to help retail investors execute their proxy votes automatically aligned with their values.

INDEX Investors Empowered by Iconikapp: What Others Write

Know of other media reports? Please let me know. (contact)


INDEX Investors Empowered by Iconikapp: Related Posts

Enhanced Reporting of Proxy Votes: Comments Update

Fiduciary Responsibilities for Proxy Voting

We Three Kings: Sharetopia

Announcing Proxy Votes Improves Corporate Governance

In Celebration of

Standing Voting Instructions: Reviewed

Retail Shareholder Proxy Participation: Part 2 – CDV

Fiduciary Duty to Announce Votes (Part 3): Take Action

Fiduciary Responsibilities for Proxy Voting


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