That only works if the equity price is a sufficiently correlated representation of the fundamental efficiencies of companies. That's the failure.
If CEOs are managing to manipulate the stock price for personal gain having nothing to do with how efficiently that company manages actually delivering products and services then that's a failure of the market as an economic allocation tool. Choose winners and loser stocks all you want - you can engineer a profit, but all that work might not do anything as a signal for companies to manage their fundamentals better. Now - you can argue about if this is just a short term influence and it doesn't matter because maybe it all still balances out in longer terms. But I lean towards thinking it's a systemic long term disconnect problem.
It's not. It is, at best, a short term incentive problem. The publishing of articles like this one is how this incentive problem corrects itself.
Consider: you are an investment manager considering allocating capital. You know that company A is engaged in short term manipulation tactics to the detriment of their long term business prospects, and company B doesn't care at all about short term market movements and focuses entirely on growing and sustaining their business. You also know that there was this McKinsey study recently that showed that companies like company B earn higher market returns long term. Where are you going to allocate your capital?
Now, I grant you, some investment managers are under pressure from their clients for short term performance. And that can skew the results here. But in aggregate, over time, the machine is efficient, and it will eventually price these things correctly. And in so far as i'm aware, there is no better known mechanism for allocating capital.
Now that this problem is published, to the extent that it's true, you, I, and anyone else who wants to can make it go away by allocating our own capital accordingly. And the nice thing is that we get compensated for doing so in the form of superior returns.
If CEOs are managing to manipulate the stock price for personal gain having nothing to do with how efficiently that company manages actually delivering products and services then that's a failure of the market as an economic allocation tool. Choose winners and loser stocks all you want - you can engineer a profit, but all that work might not do anything as a signal for companies to manage their fundamentals better. Now - you can argue about if this is just a short term influence and it doesn't matter because maybe it all still balances out in longer terms. But I lean towards thinking it's a systemic long term disconnect problem.