at least a little better, hopefully.

(5) Most shareholders hold well-diversified portfolios, often index funds. Few invest solely or even predominantly in the shares of any one corporation.

Sometimes the issues can be explored by looking at how things would work in a specific example, or a more narrow group.  I think most, certainly many, shareholders diversify as you suggest.  However, there is a not insignificant group that become highly invested in a single company, and another group that thinks they are good at "stock picking', and do not diversify.  I'm thinking of senior management of the company, founders of the company, and employees of the company, particularly as the employees rise through the ranks.  It is pretty common for senior managers to end up with a huge percentage of their net worth invested in their company--particularly since many companies break their compensation packages to employees into cash, stock options, restricted stock, kinds of programs.  I've normally had 80%+ of my financial net worth (excluding home) invested in the stock of the company I worked for.  Investors usually like to see management heavily invested in the company.

Also some investors get very excited about a company's opportunities, follow the company closely, and despite recommendations of financiaql advisors will go over 10% of their portfolio in a company.  Obviously they can lose, but some of the world's fortunes are made when people "bet the farm" on something they believe in.  Berkshire Hathaway comes to mind as an example of shareholders keeping their money there.  IBM in the '70's, Google today,,,,these are companies where "the secretaries" can be millionaires.

It seems this approach would take a lot of that away, and maybe lose some of that 60+ hour a week drive on the part of management and employees.