Source: 23 Things They Dont Tell You About Capitalism by Ha-Joon Chang

People – important people, designate regulations and rules. In this instance a market that is making money out of a business is being governed first and foremost by the rule makers who we mark out to be shareholder(s) incentivizing them to maximize company performance, maximizing social contribution, and in turn amplifying shareholders income. This gives basis of a company run by selfish interest of its governed owners.

The Marxist theory supports the idea that limited liability or  ‘joint stock company’ would enable the mobilization of large sums of capital needed for the newly emerging heavy and chemical industries by reducing the risk for individual investors (as with shareholding). His prediction that the new institution of generalized limited liability would put the productive forces of capitalism on to a new plane proved extremely persistent, where the use of limited liability hugely accelerated capital accumulation and technological progress. This meant that shareholders owned huge lumps of the company without day-to-day management of it and could sway decisions to their profit interest.

Running companies in the interests of floating shareholders is not only inequitable but also inefficient, not just for the national economy but also for the company itself because companies who are shadowed by owners, catered by shareholders are seen to be flowing interests into their pockets (shareholder value maximization) and not the national economy. In full support of Jack Welch confession, this has to be one of the “dumbest ideas in the world”. If companies are run by the egotistic greed for money making, how will the economy strengthen itself, most importantly its people?