It is approximately true that corporations are “owned” by their shareholders.1 The managers of the company work for the shareholders, and the shareholders have the ultimate power to hire and fire them and to approve major strategic decisions. In practice, modern public corporations are owned mostly by diversified shareholders who are rationally apathetic. If you have $1 million of retirement savings in the S&P 500 index, it would be absolutely insane for you to spend even five minutes thinking about who should be the chief executive officer of Sealed Air Corp., or how much he should be paid, or what Sealed Air’s strategy should be, or what Sealed Air does. Sealed Air represents about 0.016% of your portfolio, so its effect on your well-being is pretty small, and there are 499 other stocks in that portfolio, so you can’t pay attention to all of them. And you own about 0.000003% of Sealed Air’s stock, so your opinion about anything cannot possibly matter to Sealed Air.2 Your best bet, with respect to oversight of Sealed Air’s management and strategy, is to ignore it completely.

On the other hand Sealed Air’s managers can’t just run around enriching themselves and ignoring shareholders. There has to be some oversight. It just has to be delegated: The shareholders have to get someone else to oversee the company for them, so they don’t have to think about it. And this delegation also has to be pretty thoughtless and automatic: It would be insane for you to spend five minutes thinking about who you should hire to oversee Sealed Air for you.

© Bloomberg