1. Activist shareholders are more likely to be raiders than builders. A shareholder in a modern, technologically advanced company cannot stay sufficiently abreast of the operations of the company to make a useful contribution to the management. Looting, on the other hand, requires no detailed concept of the day-to-day operation of the company, only power to set required dividends and the will to go the nuclear option and liquidate the enterprise if it fails to provide those dividends.

2. Insufficient marginal taxation means that it is more profitable for CEOs to assist the looting in exchange for a cut of the take, than to resist the looting in order to preserve their long-term tenure within the firm. If marginal taxes are raised, steady salaries become more valuable relative to lump sum payments. And vice versa. Looting gives you lump sum payments, tenure in a healthy organisation gives you a steady salary.

3. Insufficient countervailing forces within the corporate hierarchy. If more groups from within the company were represented in the boardroom, it would be harder to loot the company (or at least to loot it profitably). People and groups within the company's technostructure have both the knowledge to exercise actual influence from the boardroom (as opposed to shareholders and their nominal representatives), and a strong interest in the preservation of the corporate technostructure that pays their salaries and is the source of their personal power. Of course these groups could also be bought by a prospective looter, but the more people you have to cut in on the take, the less profitable looting becomes.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.