In the near future, giant index funds, those low-cost investments that have helped millions of people to build nest eggs, will gain "practical power over the majority of U.S. public companies." That nightmarish vision originated in a prescient 2018 paper by John Coates. Mr. Coates was a professor of Harvard Law School when he laid out his argument — one that I share. Now, he is a policymaker. In February, he became acting director of the Securities and Exchange Commission's division of corporation finance. Under the new reform-minded S.E.C. chairman, Gary Gensler, Mr. Coates is in a position to address the problems he has analyzed so painstakingly. Neither Mr. Coates nor Mr. Gensler was available for an interview, but in that paper, Mr. Coates laid out his views. Index funds, which simply track the market and make no attempt to outperform it, are so effective and cheap, he said, that they have become the investment vehicle of choice for trillions of dollars of assets. Yet under current rules, it is the index fund executives, not the millions of people who invest in them, who have the power to cast proxy votes. Those votes are the heart of a system intended to give investors a voice on crucial matters like how much the chief executive is paid or whether a company is damaging the environment. As I wrote in December 2019, that lack of proxy voting capability leaves vast numbers of investors out of the equation, and gives corporations inordinate power. Consider that roughly half of all American households, comprising tens of millions of people, have a stake in the stock market. But most own equities indirectly through funds — mainly index funds. That leaves fund managers with the decisive power over corporate governance, and the biggest fund companies have sided with management roughly 90 percent of the time. As Mr. Coates wrote in 2018, "Control of most public companies — that is, the wealthiest organizations in the world, with more revenue than most states — will soon be concentrated in the hands of a dozen or fewer people." The title of his paper was "The Problem of Twelve," referring to the unelected leaders of index fund operations. What's worse, mutual fund companies are frequently conflicted. Many receive revenue from publicly traded corporations for providing financial services connected to retirement plans, yet have the responsibility of casting critical votes on how those companies are run.