The big index funds aren't exactly known as activist investors. Even if it's "Wall Street" collectively, it's not Vanguard or State Street that is pushing Union Pacific to cut costs.
It's a side effect of having real number feedback on how you're doing. Management can't just make up their own metrics anymore, there is a third party that tells you how well you are doing, and that third party wants to see constant growth or they'll start dropping your price and the financial press will pick up on that and start writing articles about how millennials are killing the rail industry.
It takes real gumption for the upper management to say "screw what the greedy bastards on Wall Street think, we're doing just fine." Especially when their yearly bonuses are tied to what those guys on Wall Street think.
Your comment still assumes active investors who are looking for value stocks. Index funds don't discriminate, they just buy stocks in the entire market.
Index funds don't discriminate against stocks, but they can discriminate against directors and executives who don't deliver their desired profits and returns. Ie, by voting them out. This is already starting to happen. See: https://www.barrons.com/articles/passive-investors-are-the-n...
I mostly read about passive firms voting more on special issues like climate change or good governance. Where did they they talk about voting out directors who didn’t deliver profits? (Honest question, I mostly read the article, then came back to it and hit a paywall.)
> Michelle Edkins, BlackRock’s global head of investment stewardship. “It’s not just about climate. It comes back to the point of governance as a lens, and when it’s not serving shareholder interests, it’s a flag.”
It takes real gumption for the upper management to say "screw what the greedy bastards on Wall Street think, we're doing just fine." Especially when their yearly bonuses are tied to what those guys on Wall Street think.