1) That's not how index funds work: they attempt to track a target market index. At most, it happens indirectly: get your company into the major indices by a short-sighted depletion of capital, and you can get some level of lift from index funds blindly purchasing your stock (though IIRC it's not a huge effect).

2) You can effectively remove certain companies from an index using derivatives in addition to the index fund. Alternatively, look into direct indexing, where you attempt to track an index by directly owning an appropriately weighted basket of stocks, though it tends to be more complicated, have greater tracking errors, and have higher fees.

>At most, it happens indirectly

Oh this is exactly what I was trying to claim. I don't have any source for it though, just general distrust of our financial system and awareness that there's many incredibly smart people trying to find every loop hole and turn every random fluctuation to their advantage.

Thanks for the info on how to effectively remove certain companies from an index though, I'll put that to use

Index funds do not buy shares because shares “look like a better ROI”. Index funds buy because non index funds buy (and same with selling).

I don't think the timing adds up for this explanation. Friedman introduced the shareholder value doctrine in 1970, and Jack Welch's Pierre Hotel speech that kicked off the era of slash-and-burn management was in 1981. Meanwhile, index funds were a tiny fraction of assets under management until well into the 2000s.

I am starting to believe more and more that the shareholder value movement has done enormous damage to the social fabric. It basically declares that the only stakeholders of an economy are owners. Anybody else doesn’t count. If this doesn’t change, then progress in AI and robotics will lead to a very dystopian society with a few haves and many have nots.