I have never heard of this idea, it was a thought that just came across my head randomly.
The theory goes:
Historically including for most of the 20th century, most stock investors or funds holding stocks in public companies were active type investors (indexing really did not even become possible for most until Vanguard came along probably around the mid 1970s to 1980s). Thus, 20-40 years ago, most people owned stock in a few or handful of independent companies.
Since there were only a few companies in your portfolio at the time, you could better track of them, read their annual or quarterly reports and follow them in detail. Thus, if you felt a company was spending too much money on the executive management you could sell the stock in protest and buy another company.
Fast forward now to say around the 1995-2015+ era when index investing really started to become more popular and common place. The only problem with passive stock indexing, is that now your stocks are split between 50 or 100 or more companies, and huge numbers of stock holders are doing this now. It is good in terms of diversification for the individual investor however it is too many companies for most investors to practically follow them.
Thus, it appears that there are no investors left to keep a careful eye on management and how these companies are being run. Rather the stock owners are mostly passive, indexing investors who never pay any attention anything going on with these companies. Thus, the fox is guarding the hen house so to speak, and the theory is that at some point CEOs started realizing this and have steadily been pushing the limits to pay themselves more and more of the company's money to see if the investors will notice or not. I am not saying that indexing should be stopped altogether (I index as well) however it may be a possible unnoticed side effect from it.
Any thoughts?