Today the government doesn't even dream of that kind of regulation anymore. The idea of doing something purely for the public good seems to be lost in the race to make the quarterly numbers as big as possible.
In practice companies have always been run for the benefit of corporate insiders. Not the widows and orphans who might own a few stocks.
Yes, that helps a bit to align incentives. In practice, it's only a start.
(It's especially interesting because investors these days tend to be broadly diversified and typically own shares in all the companies in an industry. Managers are typically highly concentrated.)
That would imply that shareholders are idiots. And especially that all hedgefunds are idiots as well. Otherwise you'd expect a lot of short-selling once the stock price exceeds the long term health, wouldn't you?
With proper shortselling, a single entity can benefit from muckracking.
Of course, short selling is the first thing that gets banned at the drop of a hat. To give a timeless example: https://www.google.com/search?q=france+bans+short+selling
You are right that it can take a while in practice. We should make it easier for the reckoning to come.
I was told that one reason that Bell Labs was formed from parts of AT&T Engineering and Western Electric Engineering was to keep the researchers from meddling with the business and to keep the business from meddling with the research. The latter was important because a strategic objective was to use technological change as a driver to prevent the monopoly telecom business from going to seed. Within Bell Labs there were often competing groups working on alternative next generation systems - analog versus digital, tube versus transistor, space division versus time division switching, coax versus microwave, microwave versus fiber, etc.