Country B Company Case Study

Most large corporations in the Country B were once run by individual capitalists who owned enough stock to dominate the board of directors and dictate company policy. Because putting such large amounts of stock on the market would only depress its value, they could not sell out for a quick profit and instead had to concentrate on improving the long-term productivity of their companies. Today, with few exceptions, the stock of large Country B corporations is held by large institutions – pension funds, for example – and because these institutions are prohibited by antitrust laws from owning a majority of a company’s stock and from actively influencing a company’s decision-making, they can enhance their wealth only by buying and selling stock in
A minority shareholder is necessarily a short-term trader.
As a result, Country B productivity is unlikely to improve unless shareholders and the managers of the companies in which they invest are encouraged to enhance long-term productivity (and hence long-term profitability), rather than simply to maximize short-term