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Letter to SEC: How Stock Buybacks Undermine Investment in Innovation for the Sake of Stock-Price Manipulation
A comment on the Securities and Exchange Commission’s proposed rule “Share Repurchase Disclosure Modernization”
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Business firms are not alone in making investments in the productive capabilities required to generate innovative goods and services. Household units and government agencies also make investments in productive capabilities upon which business firms rely for their own investment activities.
President Biden’s first SOTU Address was a missed opportunity to say what he knows to be true: Stock buybacks manipulate the market and leave most Americans worse off
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William Lazonick, president of the Academic-Industry Research Network and a professor emeritus of economics at the University of Massachusetts, who has devoted much of his research to the topic of buybacks, has written that the rule change “in effect gave corporations license to use open-market repurchases to manipulate the market.” … In an interview, Lazonick told Retail Dive, “These distributions to shareholders, particularly buybacks on top of dividends, are at the expense of keeping people employed, rewarding them for the work they’ve done, and investing in new products and processes.”
“Executives have an interest in getting the stock price up and price gouging customers is one way they can do this,” said William Lazonick, professor emeritus of economics at University of Massachusetts and co-founder of the Academic-Industry Research Network. While many drug companies argue that they use their vast profits to fund ongoing pharmaceutical innovation, Lazonick said, “we’ve shown that most of these companies don’t do that.” Instead, the soaring prices fuel soaring stock prices and executive pay, which is often based largely on that price.” — INET Grantee William Lazonick
William Lazonick emphasizes that keeping workers productively employed is key to economic recovery from Covid-19 as well as a healthy economic future