"the officers of a corporation are likely to make different choices–and, I would argue, self-serving ones, at that–from the choices that the owners of the company would make"

i think that is the key point. Give the CEO and other Cs stock options, and they'll try to maximise quarterly earnings (as long as they're there). Has anyone tried to give them junior subordinated bonds? I bet they'll make different choices.
The only way to align the interest of different stakeholders is to give each group of stakeholders a seat at the table.