Notable Activist Investor Sardar Biglari: Criticizes Index Fund Voting Rights
Fast food chain Steak 'n Shake's official account criticized the U.S. corporate governance system as "broken," specifically targeting Cracker Barrel—claiming that incompetent CEOs have left with hefty compensation over the decades while customers and true shareholders suffer losses, with the root cause being the blind endorsement of index funds for proxy voting advisory firms like ISS.
The author proposed specific reforms: passive index funds should be required to proportionally split their voting rights, automatically mirroring the actual voting preferences of retail and active institutional investors, eliminating the need for fund managers to "make political judgments for shareholders," thereby completely stripping ISS and other advisory firms of their influence, achieving "if your money is passive, your voting rights should also passively follow the market's true intentions."
The account behind the post belongs to notable activist investor Sardar Biglari—who has cumulatively invested over $241 million through Biglari Holdings to acquire about 20% of Cracker Barrel since 2011, and has launched seven board election campaigns over the past nine years, all unsuccessful. In response to his attacks, Cracker Barrel has activated its "poison pill plan" four times, costing shareholders approximately $31 million in total to defend against.
Ironically, despite Biglari's continuous criticism of Cracker Barrel's poor governance, this investment has been his most lucrative asset—bringing him over $800 million in returns over the past 15 years, double the returns from his management of Steak 'n Shake; meanwhile, a governance rating agency once placed the entire board of Biglari Holdings on its "shame list," calling his compensation structure "outrageous," as he received $33 million in salary in 2016, exceeding the combined salaries of the CEOs of McDonald's and Chipotle.
This criticism directly targets Cracker Barrel's recent leadership change—former CEO Julie Masino led a $700 million renovation involving over 660 stores to "modernize the old-fashioned sign," which faced strong backlash from consumers and politicians in 2025, resulting in a same-store sales decline of 2.6% and a 6.7% drop in traffic. She stepped down on August 10 but still received approximately $4.63 million in severance compensation over two years and security expenses paid by the company, with former Yum! Brands executive David Deno taking over.
In terms of market mechanisms, if the "index voting" proposal is truly implemented, it will fundamentally weaken the influence of large passive funds like BlackRock and Vanguard in U.S. corporate governance, transferring pricing and oversight power to actively managed institutions and retail investors. This could reshape the sensitivity of public company boards to short-term performance and public opinion pressure, while also potentially undermining the business model foundations of advisory firms like ISS.
Source: Public Information
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Biglari completed a hostile takeover of Steak 'n Shake and became CEO within five months in 2008, achieving a record seven consecutive years of same-store sales growth at the time through a streamlined menu and value pricing strategy; he then turned his focus to Cracker Barrel, launching seven proxy battles over nine years without success, making him one of the most persistent activist investors in the restaurant industry in U.S. history.
Notably, Biglari's criticism of Cracker Barrel is closely tied to his own financial interests—his approximately 20% stake has generated over $800 million in returns over 15 years, far exceeding the profits from his management of Steak 'n Shake; this implies that the governance reforms he advocates also serve to enhance the valuation and influence of his own holdings, with "activism" and "arbitrage" highly overlapping in capital terms.
This scenario is reminiscent of Engine No. 1's climate governance campaign against ExxonMobil in 2021—at that time, a very small hedge fund similarly leveraged the governance flaws of passive funds' "blind voting" to gain influence far exceeding its ownership stake; currently, the U.S. stock market is in a period of structural contradictions, with the continuous expansion of passive investment but a severe mismatch between governance responsibilities and ownership scale, suggesting that similar activist movements are likely to continue.
Essentially, this represents a transfer of pricing power—the expansion of index funds has effectively granted them significant voting rights in many public companies, yet their "zero-risk exposure" leads to a lack of proactive oversight, creating a governance vacuum; Biglari's proposed "index voting rights" scheme essentially calls for the transfer of corporate governance pricing power from passive capital back to active investors who bear risks and conduct in-depth research. If this logic is adopted by more activist investors, it could reshape the power structure of accountability mechanisms in U.S. public company boards.
ABAB News · Cognitive Law
Those who criticize others for governance failures should first check how much they have earned.
Passive money should not be paired with active power.
Activism and arbitrage are often two sides of the same stock.