One of the points it makes is that shareholders have very little power in practice, as even if you own a million dollars of Apple shares, that's only 0.00007% of the company. Not exactly enough to force through a motion on your own.

And if you think you'll build up a coalition to get a majority? Good luck doing that when you can't even find out the names of other shareholders.

Minority shareholder lawsuits? They're actually a negligible force; rare, unlikely to succeed, and low impact even when they do.

And that's without getting into 'preference shares' that grant CEOs outsized voting rights.

The book argues management can neglect shareholders' interests with impunity for these reasons.

This is almost worse, because it very explicitly cares only about the short-term price. It's also a much harder problem to solve, because you can't just tell those people "think long-term and ethically when you're exercising your impact on the marketplace!". No matter how ethical they may be as individuals, most of them probably don't even know which companies they have stakes in, much less whether those companies are heading in the right direction!

While they might be implicitly in your first group, attending significant meetings AND ensuring long term growth are primary responsibilities.

There is no short term price in stocks. Stocks are valued at their perceived long term value. If shareholders suspect a company is sacrificing the long term for the short term, they're going to dump the stock until the price of it drops to reflect that.

This also implies that if you can reliably detect that a company is eating its seed corn before everyone else does, you can make a mint shorting it.

Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%? I doubt it. I think most people were fully aware that most companies in the S&P's 10 year value wasn't going to change much; certainly not 30%. Yet, it dropped 30%. And then the next month it has risen back up to about 10% of its all-time high. I don't think people seriously thought that Apple, Coca-Cola, Pepsi, etc. suddenly dropped in value 30% and then suddenly rose 20% (yes, I know, technically it was more). If you can have swings of +/- 30% over a period of two months, I don't think the value is reflecting the long-term prospects.

There is both short-term AND long-term pricing in stocks. "In the short-run, the market is a voting machine. In the long-run, the market is a weighing machine." Ben Graham

Price volatility is an indication that either economic conditions are changing rapidly which affects the long term prospects, or that people are very unsure about what the long term prospects are.

It is not an indication that companies are being rewarded for eating their seed corn.

BTW, years ago, I knew a CEO who believed in manipulating the accounts to boost the short term at the expense of the long term. He made the mistake of telling the press he was doing this. The stock immediately tanked.

If the short term pricing theory was correct, the stock would have risen.

Then we have companies like Amazon, who explicitly say they are sacrificing short term profits for long term growth. The result? The stock price has soared to incredible heights.

Double hogwash. That pricing reflected that people suddenly needed cash right now and was irrespective of what anyone thought about long term value. I will bet most of the sellers bitterly regretted it but saw no option but to sell at whatever price they could get because they had urgent immediate needs.

And it shouldn't be. The board has only 24 hours in a day, not remotely enough time to debate every motion from every shareholder.

However, as a shareholder, you can dump your stock, which does send a message when many shareholders do this.

Indeed - but brundolf laments about the lack of shareholders "bothered with [Boeing's] nuances or long-term health" and having only a single one-bit message is not conducive to nuance.

But I wonder at what point you have to draw the line and quit excusing any and all behavior as the result of misaligned incentives, and simply hold people morally and ethically accountable for the choices they make?

The human conscience doesn't do very well with abstractions. The further removed someone's actions are from the damage caused down the line, the weaker that moral signal gets. If we want to improve our society, we have to be realistic about these things and design our institutions to buttress against them.

Sure, it only works if the people in question care about your opinion, but building consensus on what acts should be shunned only takes about a generation and a half. Segregation, dog fighting, the list is long. If we really think this is bad for society (and I do) then shrugging and talking about incentives isn't the way forward. Especially in the absence of a mechanic to actually change those incentives.

Your statement is contradictory, incentives are what hold people accountable.

There are plenty of buy-and-hold shareholders investing in bluechips.

My pet theory is a specific instance of yours: MBAs wielding spreadsheets (and, more generally, analysts wielding databases) is the abstraction layer.

Particularly in the case of stock indexes - where a single company with a $xxT poorly written contract could wipe out the entire index and everyone who held it.

"Company A agrees to purchase for $1000 each product offered by company B which meet the specifications provided".

And Company B finds that the spec says "A quartz crystal between 1um and 1mm in diameter".

So company B goes and finds a beach, full of sand, calculates there are 1 billion grains of sand in each cubic meter of the beach, and the beach is 50m long, 50m deep, and 50m wide. Total amount is 50 * 50 * 50 * 1 billion * $1000 = $125 quadrillion.

Far more than all the money in the world.

That bankrupts the company, but since there is no liability limit, it bankrupts every other investor. Even if you have 0.0001% of the company, you're still bankrupt.

If you have insurance, the insurance company is bankrupt, and you're still on the hook for whatever remains, which bankrupts you too.

Edit: ah, I should've been more specific about that. Still, I didn't say anything about the liability being unlimited.

Contractual liability is a thing...

It's not about leverage it's about taking time and figuring out what you are investing in. Everyone wants the free ride of "investing" nobody actually wants to pick stocks by doing research into which companies have sustainable businesses and good governance.

closet indexing while charging high fees is the most common

starting a bunch of different funds, and then when one of them outperforms by chance, marketing that one as the one is another.

Entrepreneurial capitalism was a constellation of small private enterprises, often family-owned. Managerial capitalism is characterized by the dominance of firms publicly traded on capital markets, and managed by professional managers who are often distinct from the shareholders.

Entrepreneurial capitalism, I believe, better aligns incentives by combining the shareholder and manager role. It also reduces dependence on capital markets, which can become a single point of failure during a financial panic. Lastly entrepreneurial capitalism makes coordination between competitors less likely, whereas such coordination is embraced by the mergers and acquisitions arms of banks in a mangerial capitalist system quite openly.

The only advantage of managerial capitalism is scale. Pooling capital in public markets permits massive economies of scale and their efficiencies.

Nowadays, well, you got your Bezos and you got your Uber...

Where modern capitalism falls down is complexity. There's 3 (non-niche) desktop operating systems, for example, and way more than 3 attributes that consumers care about in a computer. Or cars, or TVs, or airplanes, or anything else that costs more than $20. There's simply not enough levers by which consumers can send any meaningful signal through the market to producers. This breaks the Invisible Hand.