A Buyback for Our Future?

From Our Future

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People who are trying to do good — with a Green New Deal, for instance, or Medicare for All — regularly find themselves confronting a simple and sometimes sneering gotcha question: So where’s the money coming from?

How about we start putting this same simple question to the top executives of Corporate America?

These execs are currently spending incredibly vast sums buying back their own companies’ shares of stock off the open market. In 2018, researchers at Dow Jones report, 444 of America’s top 500 firms spent dollars on stock buybacks. Lots of dollars: $806.4 billion in all, up 55 percent over the year before and up 37 percent over the previous all-time buyback annual record high.

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These stock buybacks have no redeeming social value. Buybacks don’t make corporations more efficient or effective. They just make the rich richer. Buybacks reduce the volume of shares that trade, in the process upping earnings per share and share value. Who benefits from these upticks? Top corporate execs see an immediate boost. Over 80 percent of their pay comes from stock-based compensation.

The wealthy overall benefit, too. America’s top 1 percent, researchers at Goldman Sachs observed earlier this year, now own half of all the nation’s shares of stocks, with nearly 85 percent in the pockets of America’s wealthiest 10 percent.

The dollars corporate execs put in buybacks could, if invested elsewhere, help significantly share the wealth the modern American economy creates. Imagine how much brighter our future would be now if the over $5 trillion that S&P 500 corporations have spent on buybacks since 2007 had gone instead to paying higher wages or training workers in new skills or making corporate operations more eco-friendly.

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