Should investment companies or funds be allowed to vote as shareholders?

This is a philosophical question, with implications for jurisprudence. A company is given the status of a corporation (from 'corpus' a body) in the legal fiction that it is an independent agent that can, like human beings, own things and enter into contracts. One question, raised in the 'Unity of the Mind' (ISBN: 9780312120177) is whether there is such a thing as a 'group mind', that would mean that, like Hobbes Leviathan, companies would be genuine agents. This question is connected, but different.

If you own shares in a company, you, as an owner, can influence the direction the company takes by voting at general meetings. That's what that sense of 'ownership' means. If, though, you buy shares in a fund, an investment trust, say, then you're buying a company that buys companies. You're effectively authorising the fund to act as your proxy when voting as a shareholder for the companies that it has bought.

So far so ordinary. The effect this has, though, is to take the control of companies away from direct human control. If most of the shares of a company are owned by other companies, then the directors of the company no longer need to appeal to all their shareholders in order to achieve what they want, they only have to convince the few people, who have the effective proxies from thousands, that it is in their interest.

That's where the temptation to corruption arises. Instead of the stock market helping companies become more open and effective because they are controlled by the will of many shareholders, instead, a few individual humans, who don't own any of the shares themselves, but make a living out of charging those they hold shares for in proxy, make the decisions, because only a few of them are the shareholders.

So the power of these institutional investors tempts companies to court them, rather than the actual shareholders. Instead of needing to, for example, make the company more environmentally friendly, in the interests of many shareholders, they can simply take one person out to expensive lunches or, if they're less scrupulous, bribe directly with money, an not bother.

If voting shares could only be held by natural people, not corporations, investment companies could still make money from owning shares, but the distortion of the control of companies by companies would be avoided. Not completely, because institutional investors could still manipulate companies by taking rewards for buying or selling shares, but this would be less dangerous as there'd still be individual stock holders to prevent the corporation from acting wrongly.

If you see corporations not as legal fictions, but as actual entities, with the same rights and power as individuals, then none of this is a problem.

There is, though, the problem that, since they are not individuals, companies cannot be put in prison. The sanctions open to controlling people are missing.

If you hold that companies should only be owned (in the sense of controlling ownership) by natural persons the danger that rogue companies pose to humanity, by, for example, turning a country into a corporate plutocracy by bribing the governments to act in the interests of the companies, rather than natural human owners, is much reduced.