Why would passive funds invest in corporate governance?

Ownership by passively managed funds has increased over the last 20 years. They are called passive because they hold stock in proportion to the company’s weight on a published index, such as the FTSE100 or the Dow Jones Industrial Average. Being tied to indexes means they cannot modify the weight of a specific company in their portfolio. Henry Friedman and Lucas Mahieux explore passive funds’ incentives to monitor the firms they invest in and present a nuanced view of the role that these funds play in firms’ corporate governance.