Then someone would show this arrangement to a judge who would order the executive who approved it to be placed in prison. Circular ownership is not allowed in many jurisdictions.
For example, something like a pooled company that exists to provide this service for dozens of corporations thereby meeting ownership dilution requirements to avoid triggering circular ownership statutes.
Corporate tax lawyers are bright (a well-deserved compliment). Someone would figure out how to hack it. And then the well-intended hypothetical law would just put money into the pockets of lawyers and accountants at the expense of shareholders. It'd sound great on a campaign trail but be stupid in practice.
The judge is there to interpret and to apply the law. If there's a hole, there's a hole. And the incentives would be immense to find a legally defensible hole. Think bug bounty on an unfathomable scale.
When the law says "companies can't own themselves, even indirectly, or the CEO goes to jail" the judge will be able to see that company A owning company B which owns company A is indirect self-ownership, and send the CEO to jail. No matter how complicated a scheme the CEO comes up with, the judge can likely see through it.
