In terms of the political organization of businesses, large publically traded companies most closely resemble rigged election autocracies. There are typically millions of people-shareholders-with a nominal say in the choice of chief executive. But in reality the decision to retain a leader comes down to the choices of senior executives, board members and possibly a few large institutional investors. No executive lasts long if he does not keep this small group happy, which is why such insiders receive large bonuses and rewards even as the organization fails. Investing to promote an increase in a stock’s price and paying large dividends might be really good for shareholders and the economy as a whole, but generally these groups are not the political threat to the corporate leadership. So, as in dictatorship, insiders prosper at the expense of the broader community. This will not change until publicly traded companies alter their governance.
Bruce Bueno de Mesquita and Alastair Smith, authors of The Dictator’s Handbook
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