Large institutional investors like mutual funds, pension funds, etc. have at least some of their incentives aligned with their own investors - they want the value of their holdings to go up (to increase management fees), which means exercising some level of corporate governance. For instance, looking askance at value-destroying vanity purchases (arguably, Oculus being the latest example).

Even this minimal level of oversight isn't possible when they have no voting rights worth mentioning.

Shareholders are so far out of the loop, rarely are they consulted on important business decisions. Usually when things start going sour is when they start making noise, and by that time it's often too late. Most aren't going to question the actions of the company so long as the price keeps going up. While an institutional investor could divest themselves of a stock if they don't like how the company is managing their purchases, it would likely be hard to justify removing GOOG, APPL or FB from their portfolio right now. It's not like mutual fund managers are that great at beating the market, especially after fees.

Some managers make turning around failing companies as stockholders their business. They go in, push for changes that will increase the value of the company, and exit, taking the cash and look for another failing company they think can do better.

>The flood of blind investing through retirement funds has further diluted shareholder influence to little more than demanding increasing share price.

But this is the only thing shareholders have the right to demand anyway. As long as they can ensure the CEO and board of directors are maximizing share price, the system is working.