Stock Buybacks Aren’t Always the Best Option, but They Shouldn’t Be Banned

Stock buybacks may not always be the best stewardship of a company’s resources, but that doesn’t mean they should be illegal.

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After corporations spent more than $1 trillion on share repurchases last year following huge corporate tax cuts, politicians on both sides of the aisle have moved to limit the ability of businesses to buy back their own stock in the future. But substituting the judgment of executives who know their business best, and who have a fiduciary responsibility to shareholders, for that of Washington’s politicians who are reacting to class envy among their constituents is unlikely to result in a better outcome.

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Is All Lost? Record Share Buybacks But Stocks Get Crushed

In the third quarter, share buybacks by S&P 500 companies totaled $203.8 billion, according to S&P Dow Jones Indices today. These are actual buybacks, not hyperventilated announcements of possible future share buybacks:

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The effect on the economy is nil, but it was hoped that it would pump up share prices, and it did for a little while, but now the opposite is happening.

The report by S&P Dow Jones Indices explained that the buying ‘continued to be top heavy,’ where the top 20 companies playing this game accounted for 54.3% of all S&P 500 buybacks.’

The American Dream Deferred – Brookings Institution

My father was born in the small, segregated mountain town of Hendersonville, North Carolina, in 1936. Less than 100 years before his birth, enslaved black Americans were building Hendersonville’s Main’Street.

The son of a single mother, my dad grew up in poverty. When his mother became too ill to raise him, his grandmother stepped in until she too was no longer able to care for him, and then a local family took him in as their’own.

With no source of financial support and no tradition of college in his family, my dad never considered going to college. But members of the local community, recognizing his potential, encouraged him to go. His church even sent around a collection plate to help pay his first semester’s tuition at North Carolina Central’University.

  • Publisher: Brookings
  • Date: 2018-06-27T13:00:02+00:00
  • Twitter: @BrookingsInst
  • Citation: Web link (Read More)

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Booked: Valuing the World, with Mariana Mazzucato

If someone’s rich, does that mean they’re productive? In her latest book, The Value Of Everything: Making and Taking in the Global Economy, economist Mariana Mazzucato, director of the Institute for Innovation and Public Purpose at University College London, unpacks a few hundred years of economic history to explode the myth that wealth is created solely by a small pack of trailblazing, billionaire entrepreneurs. Innovation, she argues, is a collective process. And as CEOs skim billions off of share buybacks, the people and institutions who help feed their profit margins’from blue-collar workers to public-sector researchers’may not be getting the credit and cash they deserve. Making a fairer and more equal economy in such a context will mean not just redistributing wealth, but reassessing who society’s wealth creators really are. It’s to that end that Mazzucato invokes Industrial Workers of the World founder Big Bill Haywood: ‘The barbarous gold barons do not find the gold, they do not mine the gold, they do not mill the gold, but by some weird alchemy all the gold belongs to them.’

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Interserve dishes up a mess – MoneyWeek

Another huge outsourcing group is in big trouble. What went wrong, who is to blame, and what happens now? Matthew Partridge reports.

In January, outsourcing giant Interserve was placed under special monitoring by ministers. While it insisted at the time that it wasn’t about to become the next Carillion, says James Moore in The Independent, Interserve is now ‘in rather urgent talks with its lenders about turning a substantial chunk of its ‘600m-plus debt pile into shares’. As a result, ‘punch-drunk investors’ facing massive dilution have seen the shares slump by 50% in a week. They have lost 90% since January.

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