Bogle argues that poorly designed compensation schemes encouraged the speculation that caused the last two financial crises. By promising big paydays to executives for hitting quarterly earnings numbers or short-term stock price targets, compensation committees encouraged chief executives to take excessive risks, he says.

So why would Vanguard vote against proposals to limit such pay? "If Vanguard wants to manage the 401k's of large corporations, it doesn't want to offend their CEOs by voting to rein in their compensation," argues Lisa Lindsley, AFSCME's director of capital strategies.

Bogle agrees. "The three lowest voters for shareholder proposals in the AFSCME report are the three biggest providers of defined contribution plans," he says. "Vanguard says, 'We're much more active than you think because we talked (privately) to 400 managements last year, and we get them to change what they're doing.' But at some point you've got to say, 'Here is the data and, failing any other explanation, the data is telling us the truth.'"

Glenn Booraem, a member of Vanguard's proxy oversight committee, characterizes the AFSCME analysis as simplistic. He says Vanguard works behind the scenes to ensure that executives are compensated appropriately.

"AFSCME's got this very black-and-white view that all management proposals on compensation are bad and all shareholder proposals are good," he says. "I think that is a terribly simplistic view of governance. We've taken the perspective that we don't want to be in the position of micromanaging . . . compensation practices."

Activist shareholders may feel differently. Those dissatisfied with their 401k plan's voting record on shareholder proposals might want to switch to a socially conscious fund shop. Such companies typically take a more activist approach.

"During the 2010 and 2011 proxy voting seasons, we voted 84% of the time against management resolutions to increase executive compensation," says Julie Gorte, a senior vice president for sustainable investing at Pax World Management, a socially responsible fund company in Portsmouth, N.H.

"It's a reflection of our belief that executive compensation should be what it isn't. It should be fair, it should be performance-based, it should compensate managers for long-term performance rather than what happened in the last 10 minutes, and it should be transparent," says Gorte.

The fees on Pax World funds are far higher than those at Vanguard, however. The retail shares of the Pax World Growth (PXGRX) fund have a 1.29% expense ratio. That's 18 times more expensive than the Vanguard Total Stock Market index fund. Until there are more equitable fee structures at socially responsible funds, buying an index fund may be the only "Adam Smith-ian" solution for activist investors, other than investing in individual stocks and voting on shareholder resolutions themselves.

Of course, you can always go the sleeping-bag route.

Fund mentioned on the previous page: Vanguard Total Stock Market Index Admiral (VTSAX)