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Chapter 2: Shareholders: Ownership > Waking The Sleeping Giant

Waking The Sleeping Giant

Transferability has had consequences for corporations as well. It means that the interests of shareholders and managers are based on incompatible premises. The investor will want to sell at the first sign that the stock may have reached its trading peak whereas the manager wants stable, long-term investors. The American corporate system was initially based on the permanence of investor capital. However, while the capital may have remained in place, the owners kept changing. Unintentionally, the growth of the institutional investors may have served to reintroduce stability in stock ownership. That could not happen until the institutional investors were shocked into activism by the abuses of the takeover era.

An essential part of the theoretical underpinning for the market was the notion that shareholders should sell to each other and as often as possible keep the markets “efficient.” During the takeover era, it became clear that, though the system was designed to promote transferability above all, there was one kind of transfer that the system would not tolerate: the transfer of power from one group to another. Despite a strong theoretical commitment to “the market for corporate control,” as soon as the means to create a genuine market were developed, corporations, lawyers, and legislators, even judges, worked quickly to obliterate it.


  

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