1. The stock market effectively becomes the CEO. The stock market is not a very good CEO because it doesn't have access to all of the detailed information that the CEO and the board do, and so it must go based on the numbers it receives and obvious metrics. A CEO of a private company can explain himself and his strategy at length to a board of directors who can give a lot of time and has access to private company information. This lets them potentially act at a much longer time horizon. This is essentially the Berkshire Hathaway thesis, and it's worked well for them.

2. The natural balance of interests between the stockholders, the workers, and the community, enforced by social norms, is disrupted, and only the stockholders interests are respected, because the CEO has a much stronger personal interest in the stock under an incentive scheme.