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Stock buybacks as a mode of predatory value extraction
Featuring this expert
Lazonick discusses how we evolved from a society in which corporate interests were largely aligned with those of broader public purpose into a state where crony capitalism, accounting fraud, and corporate predation are predominant characteristics.
New technologies are not the problem. It’s a system distorted by a flawed ideology.
“What is the motivation for tax avoidance? To maximize profits and juice the stock price, of course. A research team led by William Lazonick at the University of Massachusetts reports in Harvard Business Review that from 2009 to 2019, S&P 500 companies spent over 90% of net income on buybacks and dividends, with the highest levels achieved after the 2017 tax cuts, in 2018 and 2019. Taking on corporate debt to finance share repurchases has become commonplace. Never mind that share buybacks deplete corporate treasuries of cash to weather setbacks and to fund productive investment in labor and R&D.”
“As William Lazonick and other analysts have pointed out, stock buybacks artificially inflate executive pay and drain capital that could be put to productive purpose. .[xxv] — Sarah Anderson, Counter Punch [xxv] William Lazonick, “Profits Without Prosperity,” Harvard Business Review, September 2014.”