CEOs Goose Their Pay With Buybacks
When companies purchase their own shares, executives are quick to cash out.
Is it good or bad that U.S. corporations are buying back their own shares? It’s an important question, because buybacks have become the preferred way for companies to disgorge cash to shareholders. In 2018, S&P 500 companies bought back a record $806 billion worth of shares, a 55% leap from the year before. They’re on track to buy back about $740 billion worth this year, the second most ever, according to S&P Dow Jones Indices senior index analyst Howard Silverblatt.
There are two lines of criticism. One is that buybacks are great for shareholders but bad for workers, because they fritter away money that should be reinvested in the business or paid to employees. This is the line taken by Democratic presidential candidates Elizabeth Warren and Bernie Sanders, who support legislation that would ban open-market stock buybacks.