Yes and no. They're the first parties in line to pick apart bankrupt companies. The stockholders are the ones left out in the cold.

Same question then...when Icahn or others of his ilk get their claws into a board, why don't rational investors flee like the dickens?

But Icahn is a stock holder too, just sell when he does. It seems like the debt lenders will just be left with a few stripped bones to chew on.

Couple of things going on. There are a lot of institutional investors where fiduciaries have no skin in the game and are being corrupted via a soft bribery. Central banks have flooded the world with cheap capital. And you have system where stockholders that end up holding the bag (AKA you and your 401k) don't have voting rights.