Supervision

I think the way that you envision the equity markets is kind of rare, but it should be the dominant view- some would say that the markets discipline businesses to perform efficiently, because they are constantly observed by investors and pressured to meet expectations, but to expect Wall Street to only be in reactive mode to business conditions completely overlooks human nature. Wall St. does not just react to a moving market, Wall St. changes the currents of the river and the boats adapt.

The 'supervision' of investors generates an environment where companies act to satisfy the short-term profit goals of their investors, and this may totally sabotage their chance of having a sound long-term business plan that is good for their workers. People argue, 'But Wall Street just seeks profitable companies and buys their stocks', but that doesn't cover it- Wall Street sets expectations for companies and then companies try to hit those marks. Wall Street forces changes in business philosophy- companies that would normally not are outsourcing their labor force or cutting worker pensions or cutting their product quality, to hit short term expectations.