Until recently, Wall Street was stabilized somewhat by the fact that the majority of stock was owned by individuals, who tended to hold onto their shares for a relatively long time, and who didn’t usually second-guess a company’s management unless they held very large blocks of shares.

But today, the ownership of American business has undergone a watershed shift to mutual funds and pension funds and other institutional investors.  Professional portfolio managers run these, and professional portfolio managers have to be concerned with how they look. 

They certainly don’t look like they’re earning their keep if they just park money in a stock and check on it every ten or twenty years.   They need to constantly show how they beat market averages this year, this quarter, even this week. This gives them a much shorter-term focus, coupled with a willingness to trade on the basis of any Wall Street perception that may move the price of a stock up or down a notch or two.  Moreover, when they are proved right about a stock, what is vindicated is usually not their estimation of a company’s eventual profitability in a literal sense, but just their reading of other people’s perceptions of the trading value of the stock.

In other words, they make their reputations and their money largely by their ability to tune into, and amplify, the virtual-reality aspects of the capital markets.

Such investors make life a "challenge" (a stray thought: whatever happened to plain old-fashioned problems?) for the contemporary CEO trying to "maximize shareholder value."

To begin with, they virtually require that a CEO expend a significant amount of time and energy accommodating moods and tastes in the galleries of the investment community.  Certainly when it comes to faddishness, the people in these galleries can be right up there with the most fickle of fashion editors.

For example, one action that recently became  almost guaranteed to drive up the price of a stock was a major layoff or downsizing.  Wall Street became infatuated with such actions.  Yet it wasn’t all that long ago that companies in real need of staff reductions went to great lengths to avoid laying people off, because this would send a signal to Wall Street that they were "troubled."

Were all layoffs in the past inadvisable on their own merits, and are all more recent ones advisable on the same grounds?  Common sense would suggest otherwise.