...so I was debating with a utilitarian that stock markets are good because they keep managers in private equity firms honest. You don't need labor regulations when stock markets ensure that management works for a profit instead of favoritism among employees. Instead, managers will make decisions that keep the firm objectively efficient. If they don't, then investors will discipline them.

The utilitarian countered that managers will still play favorites in that they'll allow employees to break the rules when it's profitable or useful for office politics that make managers look good or prevent them from looking bad. Managers will also keep track records of employees who break the rules profitably in order to know when to count on them, so they effectively become favoritists. This can even involve metagaming office politics when managers favor employees who are connected with entertainment to convert compensation towards. For example, maybe an employee knows some fun clubs, resorts, or hangout spots to spend salaries and vacation time on.

My question is that from rational perspective (in contrast to idealist, pragmatist, and artistic perspectives), why is that counter a problem?  Keep in mind that we're assuming that utilitarianism is good (in contrast to deontology, egoism, hedonism, virtue ethics, nihilism, absolutism, relativism, universalism, etc.).