Isn't the rise of index funds an example of rational choices in a free market leading to suboptimal outcomes?

You contend that the success of corporations maximizing shareholder value relies on active shareholder governance. Yet the rational choice for an individual in an efficient market is to simply diversify their portfolio and minimize fees through passive investments. How would a freer market fix the time frames issue that both of you agree is a problem and you suggest active long-term shareholder pressure is necessary to solve?