Mutual fund investors often represent significant shareholder blocks in big Wall Street firms, but they take little interest in elections of board directors or other proxy matters.

Critics say this built-in apathy toward corporate decisions, combined with new proxy voting rules, has made it easy for big firms such as Goldman Sachs and Morgan Stanley to award executives and traders with huge bonuses.

"Directors are asleep at the switch because mutual funds are asleep," John Bogle, retired founder of the Vanguard Group, told The Wall Street Journal. "If mutual funds got together and said, 'We're not going to stand for it anymore,' the world would change."

The Investment Company Institute said mutual funds don't always follow management in proxy contests and added that in 2007, funds voted in favor of shareholder proposals almost 40% of the time.

Further complicating the issue, proxy elections are usually held in April and May, while mutual funds don't disclose their votes until around August.

"By the time shareholders get a picture of what a fund is doing, it's long past the time when it's relevant," Stephen Davis, executive director of Yale University's Millstein Center for Corporate Governance and Performance, told the Journal.

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